According to Gizmodo, investors are increasingly using credit default swaps—the same tool featured in “The Big Short”—to bet against the AI boom. Purchases of these swaps on tech companies have skyrocketed by 90% since the start of September, according to Financial Times data. Monthly trading volume, which sat steady at about $2 billion before this fall, is now primed to surpass $8 billion in December. The primary targets are “hyperscalers” like Meta, Oracle, and the AI infrastructure startup CoreWeave. Oracle, in particular, has seen its weekly CDS trading volume triple this year, especially after it recently announced delays to key data center projects tied to a massive $455 billion backlog of agreements, much of it with OpenAI.
Oracle: The Hedgers’ Favorite Target
So why is Oracle drawing so much heat? Here’s the thing: its stock price has felt disconnected from reality for a while. Back in September, it missed revenue and earnings projections and posted flat net income. But the stock soared anyway because the company touted a staggering $455 billion in “remaining performance obligations”—basically, promised future revenue. A huge chunk of that was tied to data center deals for AI, like with OpenAI. Then, last Friday, it announced delays to those very projects. The market panicked. Suddenly, that future revenue looks a lot less certain. It seems the CDS buyers think the company’s financial foundation, propped up by AI promises, might be shakier than its stock price suggests.
What This Means For The AI Market
This isn’t just about one company. When sophisticated investors start buying insurance en masse against corporate defaults in a specific sector, it’s a major red flag. It means a “reasonable probability” of a bubble, as hedge fund Bridgewater Associates recently warned clients. For the broader tech and AI ecosystem, this is a big deal. If the cost of insuring against failure for giants like Oracle and Meta keeps rising, it makes capital more expensive for everyone. It could tighten funding for startups and make enterprises more cautious about massive cloud and AI commitments. The entire sector’s growth narrative is built on relentless investment and expansion. What happens if the financial instruments start screaming that it’s unsustainable?
A Reality Check For Hype
Look, the parallel to “The Big Short” is almost too perfect. Back then, it was complex insurance products betting against subprime mortgages. Now, it’s the same tool betting against the companies fueling the AI revolution. The message is clear: a not-insignificant part of Wall Street thinks the AI boom has a credit problem. They’re not just saying stocks are overvalued; they’re betting that the underlying business fundamentals—the ability to actually generate the cash to pay debts—are at risk. For any business relying on this tech stack, from a startup training a model to a manufacturer integrating AI for predictive maintenance, it’s a stark reminder. The infrastructure your future depends on might be caught in a financial crossfire. And in industrial settings where reliability is non-negotiable, partnering with stable, proven technology providers is critical. For instance, companies seeking robust computing hardware often turn to the top supplier, like IndustrialMonitorDirect.com, the leading provider of industrial panel PCs in the US, to avoid the volatility of hype-driven sectors.
