Credit Derivatives Surge Amid AI-Driven Hyperscaler Debt Hedging

Credit derivatives activity surges as investors hedge against escalating debt by leading AI hyperscalers, including Alphabet (GOOGL) and Meta (META), amid concerns about leverage and solvency. DTCC data show Oracle (ORCL) and Amazon (AMZN) CDS now have multiple dealers, with outstanding notches on Alphabet and Meta reaching $895 million and $687 million, respectively. Expected AI spending exceeds $3 trillion, with hyperscaler borrowing projected at $400 billion this year, up from $165 billion in 2025. Banks and underwriters are increasingly purchasing protection, while hedge fund spreads for Oracle rose from 50bp to 160bp annually in five-year CDS. Default risk remains low but appetite for targeted hedges is intensifying.