Credit default swaps—derivatives that function as insurance against a bond issuer's failure—have seen trading volumes for technology firms climb by nearly 600% over the past year. Data from the DTCC reveals that tech-linked CDS trading reached $650 million in the second quarter alone. As companies like Nvidia, Meta, and Oracle tap bond markets to fund infrastructure, the market is pricing in higher risk, with Oracle’s protection costs now hovering around 200 basis points.

While the broader $9 trillion CDS market remains dominated by government debt, the sudden shift toward tech reflects a deepening fear of a credit crunch. Because the CDS market is often thin, even modest trading activity can trigger outsized price swings, forcing investors to weigh the sustainability of AI-driven balance sheets. When the cost of this protection rises, it often forces bondholders to sell off their holdings, effectively increasing borrowing costs for the very companies attempting to lead the artificial intelligence revolution.