Five Tech Firms' Debt Protection Costs Hit Highest Level Since 2021

Debt protection costs for Amazon, Alphabet, Microsoft, Meta and Oracle climbed to their highest level since 2021 over the past month, while investors sought ways to limit losses tied to AI.

Oracle’s credit default swap spread widened by more than 1 percentage point. Credit default swaps, or CDS, are contracts used to protect against losses from a debt default. The rise in protection costs covered all five large technology companies, extending beyond a single issuer.

The move follows earlier increases in protection costs for AI-linked corporate debt. Investors are also using stock options, while data center operators are exploring derivatives tied to the price of computing capacity. The contracts address different risks across the AI market.

Options trading tied to CoreWeave reached a record in October and remained elevated afterward. Among the trades were puts expiring in 2028 with a $35 strike price. CoreWeave shares traded at about $55 in late October, well above that strike.

A put gives its holder the right to sell at a preset price during the contract’s term. The CoreWeave contracts concern the company’s share price, while the CDS contracts concern debt. Proposed computing derivatives would address another exposure: the future price of rented processing power.

An index of Nvidia B300 chip rental prices rose about 56% in 2026 to $7.56 per hour as of Nov. 1. That index reading measures rental prices; it is not a rate charged by every operator.

Jump Trading has established a desk that trades price differences among computing providers. It is also developing privately negotiated derivatives intended to help clients hedge against sharp drops in future computing prices.

An operator renting out Nvidia chips, for example, could buy a put giving it the right to sell computing capacity at an agreed price during a specified period. The contract could instead settle in cash.

Susquehanna International Group has received requests from data centers and privately held cloud providers for similar hedges, including puts linked to computing indexes. A hedge could help an operator address a lender’s concerns when seeking financing.

Jump Trading President Dave Olsen compared buying a hedge to carrying insurance even when a house fire seems unlikely. A buyer need not expect prices to fall to want insurance. For now, hedging activity remains much smaller than the broader AI trade.