NVIDIA's reported involvement in negotiations for an AI infrastructure transaction exceeding $750 billion has sent shockwaves through the credit derivatives market, with the cost of protecting against its default posting a record single-day increase. Meanwhile, Apple's restrained capital expenditure strategy is gaining favor with the market, allowing it to reclaim the title of the world's most valuable publicly traded company.
According to ICE Data Services, the spread on NVIDIA's five-year credit default swap (CDS) surged as much as 14 basis points to 82 basis points during the session, marking the largest intraday jump for the contract since it became actively traded in November. As a result, NVIDIA shares closed down 5% on Monday.
Apple shares have climbed 24% year-to-date, closing up 1.2% on Monday with a market capitalization of approximately $4.93 trillion, surpassing NVIDIA's $4.78 trillion valuation.
The divergence between these two tech giants underscores a deep-seated market debate over the path of AI capital expenditure. Investors are re-evaluating whether the massive spending on AI infrastructure represents a competitive moat or a potential credit risk.
Massive Guaranteed Deal Triggers Credit Market Alarm
NVIDIA and South Korea's SK Group announced a collaboration agreement worth over $500 billion late Friday evening. Simultaneously, NVIDIA is reportedly in talks with OpenAI regarding a guarantee deal valued at up to $250 billion to help the AI firm lease space in a data center project being developed by a SoftBank subsidiary in Ohio. The disclosure of these plans has sparked widespread market concern.
The sheer scale of these transactions is pressuring the debt market. Sal Naro, Chief Investment Officer at Coherence Credit Strategies, commented: "The capital expenditure required to build AI infrastructure is enormous, creating a supply shock in the debt market. The fear is that opaque financial structures, off-balance-sheet transactions, and complex relationships between related parties could lead to 'financial alchemy,' ultimately resulting in credit rating downgrades."
Such large-scale financing typically requires investment-grade credit ratings for support. However, AI companies like OpenAI and Anthropic PBC are currently in a phase of aggressive cash burn for expansion, making it difficult for them to independently secure such ratings. This means the backing of large technology firms like NVIDIA will be crucial for these debts to achieve a high rating.
Market Re-Evaluates Apple's 'Asset-Light' AI Approach
Apple shares have gained over 22% year-to-date, leading the "Magnificent Seven" tech stocks. Jay Woods, Chief Market Strategist at Freedom Capital Markets, noted: "Apple was once criticized for not investing enough in AI, but now it appears they successfully avoided the capital expenditure trap."
Apple's capital expenditure has been declining for the past three consecutive quarters, standing in stark contrast to its peers. Alphabet recently raised its full-year capital expenditure guidance to support AI infrastructure, and Tesla has also increased spending to advance its Robotaxi and robotics businesses. Both companies saw their stock prices decline following their earnings reports. Alphabet's year-to-date gain stands at roughly 3%, while Tesla has plummeted nearly 30%.
The market is now awaiting earnings reports from Microsoft, Amazon, and Meta this week, all of which are expected to announce further increases in AI-related spending. Apple will release its results after the US market closes on Thursday, with investors focusing on the rollout progress of its "Apple Intelligence" features and its ability to achieve AI scalability without significantly increasing capital expenditure or compressing operating margins.
Notably, Thursday's call will mark the final earnings conference for outgoing CEO Tim Cook. He will officially step down on September 1st, transitioning to the role of Executive Chairman, with Apple hardware engineering veteran John Ternus set to take over as CEO.
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