Rising CDS premiums warn of heightened default risk for US big-tech debt

Investors are paying record-high premiums for credit default swaps on the seven biggest US tech companies, indicating growing worries about their ability to service more than $US600 billion of debt. The surge follows a rapid increase in bond issuance driven by AI-related infrastructure spending, pushing CDS spreads wider, especially for Oracle, whose cost rose from just above 0.4 % to over 2 %. ASIC’s Calissa Aldridge said the market is questioning whether AI investments will generate sustainable returns.

Analysts from Montgomery Investment Management highlighted a doubling of debt issuance in the past half-year and warned of potential contagion if one firm falters. The trend raises concerns for Australia’s $4.5 trillion superannuation pool, heavily invested in US equities, while bond market leaders such as Franklin Templeton’s Sonal Desai point to rising yields and policy uncertainty as additional risks.