Alphabet CDS Spreads Widen as Weak Earnings Renew Doubts Over Debt-Funded AI Spending

Alphabet's (GOOGL) fifth-year credit default swap spread widened as much as 5.3 basis points to 84 basis points on Thursday, the largest increase since September 21, after the Google parent's quarterly results missed estimates, Bloomberg reported citing ICE Data Services. CDS costs for Meta (META) and Broadcom (AVGO) also rose. Alphabet's third-quarter revenue fell short of expectations, with advertising growth slowing to its weakest pace in more than a year. Ad revenue is a key funding source for the company's large-scale AI investment, sharpening bondholders' focus on the gap between capital expenditure and cash flow. Gavan Nolan, executive director of fixed income pricing at S&P Global Market Intelligence, said equity investors stand to gain if AI investments succeed, but creditors bear loss risk if they fail. Barclays strategist Jigar Patel, citing trading data, said CDS volume tied to the 10 largest hyperscalers and chipmakers has grown more than eightfold this year to $176 billion. Oracle (ORCL) has the most active CDS trading, at $46.8 billion, nearly six times last year's level.