Investors are increasing their defensive positions against the wave of debt linked to artificial intelligence expenditures as Meta Platforms, Alphabet, and Microsoft deepen their involvement in credit markets. These three hyperscale technology firms have been added to the latest CDX Investment Grade Index by S&P Dow Jones Indices. This index, which comprises 125 companies, is used by investors to hedge credit risk or express views on corporate debt.
The index is reconstituted every six months, and the inclusion of these companies reflects their status as core components of the US credit market. According to Barclays strategist Jagar Patel, this change could make the index a more accurate reflection of the broader corporate debt landscape. It also underscores how active credit derivative trading linked to technology companies has become.
This shift is driven by record-breaking bond issuance from hyperscale companies financing AI infrastructure, which has contributed to a surge in credit default swap trading activity. Data from the Depository Trust & Clearing Corporation shows that contracts linked to individual high-grade tech firms, which were nearly untradeable a year ago, are now among the most actively traded derivatives outside the US financial sector.
The latest index revision, the first conducted by S&P Dow Jones Indices following S&P Global's acquisition of IHS Markit, also removes issuers that have fallen to junk status. Such changes typically boost trading activity as investors rotate into new, active contract series.
Amid this transition, Oracle stands out. Based on DTCC data cited by S&P Dow Jones Indices, its credit default swaps are the most liquid among investment-grade companies, with average weekly trading volume exceeding $830 million. Meanwhile, the cost of insuring Oracle's debt has climbed since September, driven by concerns over AI-related spending, at one point reaching levels not seen since 2009.
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