Prof G Markets · Wednesday, July 29, 2026
Credit Default Swap (CDS) spreads have widened significantly for major tech companies, indicating increased market concern about their ability to service debt. This divergence between strong company fundamentals and widening market pricing suggests underlying worries about the actual payoff timeline and effectiveness of AI investments.
“The other development more recently to your question Ed is also the CDS spreads, meaning the cost of insuring yourself against these companies going under in the next five years, those CDS spreads have also widened out quite significantly.”
“So, one way of answering your question is that there's simply so much debt that has come to the market and the market has now begun to ask some questions around, well, if these companies need all this financing, what is the right interest rate, what is the all-in level of yield that is required to finance the build out the way that we're seeing at the moment?”
“What is the payoff profile? Because if it is involving slower streams of payments in the future, then it does imply that the equity should be lower today and credit spreads should be wider today.”