# Wall Street Picks AI Winners and Losers as Credit Swaps Surge > Source: > Published: 2026-07-29 14:07:35+00:00 (Bloomberg) -- As Big Tech barrels toward trillions of dollars of planned spending on AI, a key cog in credit markets is showing signs of pressure. That, in turn, is lifting the cost of financing artificial intelligence while offering an early look at potential winners and losers. The price of protecting tech firms' debt against default is jumping, in part on mounting concern about whether all the investment in AI will pay off. Banks, investors, and others are using these derivatives — dubbed credit-default swaps — to hedge their exposure to companies taking on swelling debt burdens to compete in the AI boom. The CDS market isn't widely watched outside of credit circles, but it can have significant ripple effects. When companies' credit default swaps surge, their borrowing costs can follow suit, because bond investors often look at the derivatives market to gauge repayment risk. Many also seek to profit from the dislocations that can emerge when CDS costs climb above bond spreads. The increases in CDS lately have been noteworthy. The cost of protecting Oracle Corp. against default reached a multi-year high this week. It's now above 2.15 percentage points, or 215 basis points, up from about 145 basis points at the end of last year. Swaps on SpaceX have surged by more than half since they started trading last month, to around 185 basis points as of Wednesday. Contracts tied to Nvidia Corp., Meta Platforms Inc., Amazon.com Inc., and Alphabet Inc. have also hit new highs, albeit at lower levels than Oracle, SpaceX and CoreWeave Inc. The big tech firms' vast financing needs mean that on top of competing for energy, real estate and chips, they're also vying for capital. Credit derivatives can sometimes signal how investors expect companies will fare. "The market is picking winners and losers in the AI race, and the number of companies on the negative side is growing," said Matt Maley, chief market strategist at Miller Tabak. Companies including Amazon, Meta and Microsoft Corp. are posting results this week, and may disclose more about their capital-expenditure plans. As CDS levels climb, corporate bond yields have been jumping too. Oracle has seen yields on notes due in 2054 surge to 7.8%, up almost a full percentage point this year. The firms are tapping every possible market, from European high-grade corporate notes to US commercial-mortgage bonds and leveraged loans, and investors are increasingly pushing back. "As issuance surges, the question is whether the all-in yield climbs to a level where the marginal data-center dollar no longer clears its return hurdle, forcing the capex cycle to self-throttle," Torsten Slok, chief economist at Apollo Global Management, wrote in a note Wednesday. BlackRock Inc. sold a $12.5 billion bond Monday at a yield of 7.53%, one of the highest levels for a blue-chip data-center debt offering since the AI borrowing binge started last year. A $25 billion bond sale from Amazon.com this month ended up with only slightly more orders than there were bonds for sale. The norm has been more like four times. Companies including Meta are trying to keep debt off their books by finding partners to help develop projects. BlackRock's bond sale this week was for a data center in Texas that Meta is developing. BlackRock entities hold 80% of the project's equity, and sold bonds backed by that stake. Meta retains about 20% of the exposure, and also guarantees lease payments on the deal. Such arrangements can make it hard for investors to assess risk. But banks with exposure to these credits will often offload it using derivatives, so CDS can indicate how much exposure is out there. Alphabet, BlackRock, CoreWeave, Microsoft and Oracle declined to comment. SpaceX, Nvidia, Meta and Amazon didn't respond to requests for comment. The following is a look at some of the biggest companies in the AI space and how credit markets are viewing them. CoreWeave: The cost of protecting the company's debt against default is by far the highest among big tech companies investing in AI, topping 855 basis points on Tuesday. That implies the market sees about a 50% chance of it defaulting over the next five years, according to a widely used pricing model. The junk-rated company, a former crypto miner, operates about 50 data centers across North America and Europe. Its free cash flow has been negative since at least 2022, data compiled by Bloomberg show. Oracle: The company borrowed $25 billion in the high-grade US corporate market in February, and said that was it for the year for straight debt. It's also sold convertible securities and common equity in 2026 to help bolster its balance sheet. Oracle is the biggest borrower outside of the financial sector in the Bloomberg US high-grade corporate bond index. Its free cash flow has been negative for its last two fiscal years. SpaceX: The company managed to win investment-grade ratings and in June, soon after its initial public offering, it sold $25 billion of bonds in a debut debt sale. Then its bonds weakened as investors fretted about the rocket, satellite, and AI company's negative free cash flow and unusual business model. Meta: The Facebook parent sold $25 billion of corporate bonds in the US in April. Like many hyperscalers, it has also backed debt for data centers it's connected to, as with the Texas deal this week. Meta is a relatively strong credit on paper — it generated more than $45 billion of free cash flow last year, and carries credit ratings in the AA tier, a high level. But it's also spending heavily on AI, and the cost of protecting its debt against default has surged to about 95 basis points as of Tuesday from around 56 basis points at the end of last year. Alphabet: The company sold its first yen bond in May, part of a roughly $60 billion spree of issuance this year globally. It also sold its biggest euro-denominated offering and its debut Canadian notes. The company's quarterly free cash flow turned negative for the first time since going public more than two decades ago, according to data compiled by Bloomberg. With its heavy bond issuance, its CDS have risen to more than 65 basis points, from about 50 basis points when they started actively trading in March. Amazon: The company has sold $62 billion of bonds in the US this year, as well as tapping the euro, Swiss franc and Canadian dollar markets. Amazon generated $7.7 billion of free cash flow last year, but that figure is set to decline as the company invests heavily in AI. Its CDS have surged to roughly 68 basis points from 36 basis points at the start of the year. Microsoft: The company hasn't sold bonds since 2017 and it carries AAA ratings. That may be why its CDS levels have risen less dramatically than competitors', to about 53 basis points on Tuesday from about 35 basis points at the end of last year.