The fears surrounding a potential AI bubble —fueled by massive capital expenditures, rising debt levels among tech giants, and questions about sustainable returns—are driving innovation in financial markets. Investors are turning to specialized derivatives to hedge risks, particularly in the credit space, as Big Tech firms borrow aggressively to fund AI infrastructure.
“Concerns over unsustainable debt loads from AI buildouts have revived single-name credit default swaps on high-grade tech issuers like Alphabet, Meta, and Amazon, turning them into some of the most actively traded non-financial contracts. With hyperscaler borrowing projected to surge toward $400 billion in 2026, hedging demand is accelerating, spawning baskets and other tailored products.” … Read more