Wall Street traders are ramping up protection against Big Tech credit risk, pushing outstanding credit default swap volume to record levels amid surging AI-era borrowing.
The total net notional value of outstanding credit default swaps on major tech firms has jumped to a record $12.5 billion, up $1 billion so far in the second quarter of 2026, according to The Kobeissi Letter.
The total value of debt being insured against default on these companies has risen 500% since the second quarter of 2025.
Oracle Corp. (NYSE: ORCL) leads all companies in CDS exposure at $6.5 billion, reflecting the scale of concern surrounding its aggressive AI infrastructure commitments.
Amazon.com Inc. (NASDAQ: AMZN) and Alphabet Inc. each carry $2 billion in outstanding CDS exposure, placing them among the most heavily hedged names in the sector.
Microsoft Corp., Meta Platforms Inc., and Nvidia Corp. (NASDAQ: NVDA) stand at $1 billion, $800 million, and $200 million in CDS exposure, respectively.
Hedging activity at Bank of America Corp. has surged dramatically, with monthly notional trading volumes of Big Tech CDS soaring 900% since the start of 2025.
The Kobeissi Letter noted that “most of these CDS contracts did not trade actively until 2025,” underscoring how rapidly the hedging landscape has shifted alongside the AI spending boom.
The letter also stated plainly that “corporate borrowing tied to AI is exploding,” with AI-linked issuance accounting for 49% of investment-grade bond issuance year-to-date.
Jordi Visser, head of AI Macro Nexus Research at 22V Research, noted that only about 12% to 18% of a projected $8 trillion AI infrastructure buildout has been completed, highlighting potential supply chain bottlenecks in high-bandwidth memory chips and power systems.
Investor Michael Burry has warned that current high-yield debt levels dangerously mirror the 1999 tech bubble and the dot-com era, raising fresh concerns about the AI financing boom.
Burry’s warnings suggest the current surge in AI-linked corporate borrowing could mirror the same patterns that led to significant market corrections in prior technology cycles.
The sharp rise in CDS activity reflects growing unease across financial markets about whether the returns from massive AI investments will justify the scale of borrowing being undertaken.
