Nvidia’s credit risk tops Alphabet’s as AI bond flood tests market limits

The credit markets are flashing a warning over the AI infrastructure boom. Six hyperscalers — Nvidia ↘ 1.47%, Alphabet ↘ 3.58%, Meta ↗ 1.02%, Amazon Amazon.com, Inc. ↘ 2.24%, Oracle ↘ 3.11%, and SpaceX — have issued roughly $244 billion in corporate bonds globally this year, more than double last year's $108 billion total, according to The Wall Street Journal. Credit default swap premiums across these names have surged to record levels, signaling that bond investors are growing uneasy about the debt-fueled pace of AI spending.wsj

Nvidia's CDS Spreads Hit New Highs

Nvidia's five-year CDS spreads have climbed from approximately 42 basis points in late June to 69 basis points by late July, surpassing Alphabet's 64 basis points and marking the largest widening on record for the chipmaker. The spike accelerated after reports on July 26 that Nvidia is negotiating a roughly $250 billion financial guarantee for OpenAI as part of a massive data center project in Ohio managed by SoftBank, with total project costs potentially exceeding $500 billion. Nvidia's five-year CDS now implies a roughly 5% cumulative default probability.reuters+4

Investor Appetite Fades

The strain extends beyond Nvidia. BlackRock ↘ 0.54% completed a $12.5 billion bond sale tied to a Meta data center campus in El Paso, Texas, with the 2048 note selling at a yield premium of 2.875 percentage points over 10-year Treasuries — elevated pricing that reflects the broader sell-off in big tech debt. Apollo has noted that order-book coverage for hyperscaler bonds has deteriorated from nearly five times oversubscribed in February to less than double by July.forbes+1

Moody's Ratings warned on July 23 that the AI infrastructure race is forcing tech giants to shift "from asset-light to asset-heavy models," with direct debt reaching roughly $460 billion and lease commitments surging to $1.2 trillion. The agency said capital expenditures across six hyperscalers are projected to hit $785 billion in 2026 and could approach $1 trillion in 2027.linkedin+2

The 'FCI > EPS' Warning

Bank of America's ↘ 0.36% Michael Hartnett introduced what he called the "FCI > EPS" framework in a July 26 note, arguing that the impact of tightening financial conditions now exceeds the supportive effect of corporate earnings. His short-term recommendation: go long defensive stocks and long-duration bonds while shorting technology and bank stocks to hedge against a reversal of "boom" expectations.news.futunn+1

The Wall Street Journal reported that recent $75 billion in offerings from Nvidia, SpaceX, and Amazon saw their newly issued bonds decline in secondary market trading — a disappointment for investors who typically resell such paper for a quick profit. With Wall Street projecting $300 billion in total AI-related investment-grade supply for 2026, the question is no longer whether the market can absorb the debt, but at what price.aiweekly+1