CoreWeave credit protection spreads top 1,100 basis points as tech giants' spreads hit records
Key Facts
CoreWeave's credit default swap spreads exceeded 1,100 basis points, while spreads for Amazon, Alphabet and Meta reached record levels, according to Reuters, amid concerns over AI-related debt. The news agency said credit protection contracts for Amazon, Alphabet and Meta traded at those levels, citing data from LSEG and S&P Global Market Intelligence. At CoreWeave, widening credit protection spreads accompanied a decline in the company's bond prices, according to a separate Reuters commentary on market trading. The moves came as Morgan Stanley estimated corporate AI-related borrowing at about $466 billion in 2026 through the report date. Concerns centre on financing AI infrastructure and borrowers' ability to service their debts if spending slows, according to analyses published by the Bank for International Settlements.
In the bond market, CoreWeave's notes due in 2032 fell below 80 cents on the dollar, according to Reuters' market commentary. The company had issued the bonds just 4 months before the trading covered by the commentary, leaving recently issued notes facing that decline over the period. Reuters described prices below that threshold as levels typically associated with distressed debt. The agency also offered a counterweight to concerns surrounding the sector's debt, pointing to the strong profitability of Nvidia, Alphabet, Microsoft, Meta and Amazon. It said these companies were widely regarded as well managed, despite debt concerns accompanying the expansion of AI financing.
The borrowing estimates show an expansion in AI-related financing compared with the corresponding period a year earlier, according to figures Investing.com cited from Morgan Stanley. Borrowing in that earlier period totalled $101 billion, compared with the estimate of $466 billion in 2026 through the report date. Against that backdrop, an analysis by the Bank for International Settlements showed a marked increase in total bond issuance by hyperscalers during 2025. The bank said issuance exceeded $100 billion, as part of its analysis of how borrowing on and off balance sheets was financing the AI infrastructure boom. That financing extends to dedicated data centre vehicles backed by bank credit lines, according to the same analysis.
Banks' provision of credit lines to data centre financing vehicles links them to off-balance-sheet borrowing structures, according to the Bank for International Settlements. In its analysis in the Annual Economic Report, the bank warned of potential consequences if hyperscalers slowed or halted capital spending. The warning covers borrowers across the supply chain whose revenues depend on that spending continuing. The bank said many could struggle to replace lost revenues if those companies cut or halted spending. It added that the difficulty could extend to servicing those borrowers' debts, linking that risk to declining revenues under such a scenario.
The Bank for International Settlements' September analysis showed widening credit default swap spreads among hyperscalers and semiconductor manufacturers. By contrast, credit protection spreads remained stable for the other companies in the S&P index, according to the bank's comparison. The widening thus encompassed two groups linked to AI infrastructure, while spreads for the index's remaining companies held steady over the same comparison. On the creditworthiness of an individual company, Microsoft states on its investor relations page that its corporate credit rating from S&P is AAA. The company adds that its Moody's rating is Aaa, alongside the strong profitability Reuters cited in its coverage of major technology companies.
Attention now turns to earnings season, with Kevin Shea, senior equity analyst at BNY Wealth, placing the relationship between earnings and capital spending among the key questions. Shea told Reuters the question was "whether hyperscalers' profitability can grow faster than their capital spending". That assessment focuses on the pace of profitability growth relative to spending at companies expanding their computing capacity. Among the companies concerned, Microsoft has scheduled its next earnings announcement for October 28, 2026, according to its investor relations website. The company said in its scheduling announcement: "The next earnings announcement will be on October 28, 2026."