Investors Increase Trading in AI-Related Credit Default Swaps

Investors are rushing to buy credit default swaps (CDS) to protect their portfolios against a potential collapse of the AI boom. This financial instrument gained significant attention during the global financial crisis and is now seeing a sharp increase in trading volume. Companies are embarking on a borrowing spree to raise trillions of dollars for AI infrastructure spending, driving demand for these "insurance-like" derivatives. According to Morgan Stanley research, the average weekly trading volume of CDS linked to bonds from Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom, and Nvidia exceeded $9 billion in September, compared to less than $2 billion in July. Year-to-date, the trading volume of the U.S. corporate CDS index has already surpassed the total for all of last year.

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