Meta beats revenue estimates as AI default insurance soars

Investors are paying more to insure the debt behind the artificial-intelligence build-out. Default protection on Meta Platforms ↘ 1.34% rose to record levels before the company reported third-quarter results on Wednesday, October 21, and contracts on riskier borrowers such as CoreWeave ↘ 8.60% reached distressed levels. MarketWatch News Corp ↗ 2.27% said in its report that investors were borrowing a tool from the financial-crisis era. The worry is that a debt-funded spending boom is starting to strain how it gets paid for.marketwatch.com

Meta's insurance costs climb

On Tuesday, Meta's five-year credit default swaps traded at 111.57 basis points, up from 68.23 on April 20, MarketWatch reported, citing Dow Jones Market Data. That means protecting $10 million of Meta debt now costs $111,570 a year, 62% more than six months ago. Comparable contracts on Alphabet ↘ 0.06% and Amazon Amazon.com, Inc. ↗ 2.20% traded near 80. "Investors feel they need some hedging," Breckinridge Capital's Nick Elfner told MarketWatch.morningstar.com

Trading has jumped as well. Weekly trading in swaps tied to seven AI-linked companies averaged more than $9 billion in September, up from less than $2 billion in July, according to Morgan Stanley ↗ 0.78% research cited by the Financial Times. Morgan Stanley estimates that AI-related companies have issued $466 billion of debt so far this year.finance.yahoo.com

Meta's results did not settle the question. The company reported revenue of $64.6 billion, up 26% from a year earlier and above estimates, CNBC reported. It also narrowed its full-year capital spending forecast to $135 billion to $145 billion, and its shares rose in after-hours trading.cnbc.com

Cracks at CoreWeave

The pressure is greatest among the more indebted "neocloud" companies. On October 15, CoreWeave's five-year swap spread passed 1,100 basis points and swaps for Amazon, Alphabet, Meta and Nvidia ↘ 1.26% also reached record wides, Reuters Thomson Reuters Corporation ↗ 3.37% reported. CoreWeave's shares have fallen 29% this month, and its unsecured debt yields about 15%, according to CNBC. The company has about $20.7 billion of debt due through 2030. Sources on credit desks told CNBC that the high-yield market was effectively on hold until after the midterm elections.cnbc.com+1

Oracle's ↘ 8.76% five-year swaps traded near 320 basis points, MarketWatch noted. "Sentiment is decidedly negative," Barclays ↗ 1.39% analyst Andrew Keches wrote, CNBC reported.morningstar.com+1

A crisis-era tool returns

Credit default swaps grew rapidly before the 2008 crisis, shrank afterward and have since made a comeback. Technology names accounted for 9% of single-name swap risk activity in the first nine months of 2026, up from 4% in 2025, according to ISDA research cited by MarketWatch.morningstar.com

Some analysts say the hedging does not mean the build-out is in trouble. Howard Mason of Renaissance Macro Research argued that hyperscalers are carrying most of the spending, not the "tiny" group of AI companies rated below investment grade. "The concern about a slowdown in the AI build-out is simply misplaced," he said.morningstar.com