Credit reprices after Alphabet's weak quarter
Alphabet's softer-than-expected third quarter revenue and earnings per share put a spotlight on ad sales that help bankroll its AI push, and credit hedges got pricier. Five-year CDS on Alphabet increased by about 5.1 basis points to roughly 84 basis points, the biggest basis-point move since July.
The shift did not stop there. Broadcom's five-year CDS moved higher by roughly 10 bps to 175.4 bps, marking a record closing level per ICE Data Services. SpaceX's five-year CDS added approximately 20 bps, ending at 266.5 bps, the strongest close since the contract began trading earlier this year.
Funding the AI buildout, and why supply matters
Investors are bracing for more borrowing as tech keeps pouring money into artificial intelligence.
One piece of potential supply: Bloomberg reported Broadcom has assembled a $63 billion funding package to help finance chips for Anthropic PBC, including a potential bond offering of up to about $21 billion that could come as soon as early next year. Separately, SpaceX entered into an equipment-finance lease of roughly $40 billion to pay for chips to fuel its AI ambitions. The company said in a Monday filing the fixed rate will be set at pricing, which has not yet occurred.
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What CDS flows are saying
Risk transfer is surging. Through last week, volumes in CDS referencing the 10 largest hyperscalers and chipmakers climbed to $176 billion this year - an increase of more than eightfold - according to Barclays credit strategist Jigar Patel, who noted some swaps, including SpaceX, only launched in recent months. He said Oracle is the most actively traded reference, with 2026 volume up nearly six times from last year to $46.8 billion.
Credit and equities are not in sync. Gavan Nolan, who is the executive director for fixed-income pricing at S&P Global Market Intelligence, said, "credit is telling a bit of a different story than equities when it comes to the tech sector," adding that stockholders may capture upside if AI pays off, while debtholders absorb the damage if it does not. He added that bond investors are intensely focused on capex and the timing of when AI revenue flips to free-cash-flow positive.
Capex discipline and the investor takeaway
There are signs of restraint. Oracle said Wednesday it plans only $20 billion of additional capital raises over the next several years via a blend of debt and equity, and its CDS recorded the steepest drop in almost nine months after the announcement. "Higher financing costs and questions around adoption have weighed on the AI trade, but this earnings season, hyperscalers have responded with greater capex discipline and more equity funding, easing some of the balance sheet concerns," said John Lloyd, Janus Henderson's global head for multi-sector and corporate credit.
The bottom line: tech borrowers are leaning harder on credit to fund AI, and hedging costs are signaling where bondholders see the risk. For portfolios exposed to tech debt or names eyeing big financings, watch CDS levels, cash burn, capex and the issuance calendar closely.
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