Flow" adherents either...memories of the "Great Recession" are coming back.

Here's an AI summary (no pun intended)...
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AI Overview

Yes, credit default swaps (CDS) are heavily being used in relation to AI capital expenditure (capex) spending, and they are signaling that financial risk is rising.
However, tech companies are not using CDS to buy chips or build data centers. Instead, bond investors and hedge funds are buying CDS as insurance policies to hedge against the massive debt tech companies are taking on to fund their AI infrastructure.

Because major tech "hyperscalers" are aggressively leveraging themselves to fund AI capex, demand for these derivatives has surged, causing AI-tied CDS spreads to spike.

Why the Demand for AI-Linked CDS is Surging
Historically, mega-cap tech giants were viewed as impenetrable financial fortresses with massive cash piles and little to no debt. The AI arms race has radically flipped this reality:

The AI Debt Wave: According to reports from Goldman Sachs, AI-related debt issuance has reached nearly $500 billion, with companies like Alphabet, Amazon, Meta, and Oracle issuing hundreds of billions in bonds to build infrastructure. Nvidia even tapped the bond markets for the first time.

Outpacing Cash Flow: Hyperscalers are on track to collectively spend more on capex than they generate in free cash flow. For companies like Oracle, projected capex is roughly double its operating cash flow.The Need for Hedges: Fixed-income investors who hold these bonds are using Credit Default Swaps to protect themselves against the possibility that these massive investments fail to pay off.

Is This Trend Increasing Financial Risk? Yes, the rising cost of CDS (widening spreads) is a direct indication that credit risk in the technology sector is increasing. While analysts emphasize that an immediate actual default by a major tech giant remains very low, several structural risks are building up:

1. Mismatched Asset Lifespans
A primary credit issue is asset-liability matching. Land and buildings for data centers can support long-term debt, but the highly expensive GPUs inside them have short technological lifespans. If the chips must be replaced and upgraded before the underlying debt matures, companies are forced into a relentless cycle of recurring capex.

2. The Return on Investment (ROI) Timeline
Bond markets are pricing in heightened risk because they doubt whether AI commercial adoption can generate cash returns fast enough to service the ballooning debt. Even block-buster earnings are failing to calm fears about the long-term sustainability of AI revenue models.

3. Rising Costs of Corporate Capital
Because investors are demanding higher yields to take on this AI debt, borrowing costs are surging across the industry. As noted via Apollo Global Management, bond yields for data-center debt have jumped significantly. If capital becomes too expensive, it may eventually force the AI capex cycle to self-throttle
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