Key Takeaways:
Nvidia's $750 billion in AI infrastructure deals is testing the limits of credit markets, with its default protection costs surging to a record and the stock sliding 5% as investors question the financial engineering behind the AI trade.
Nvidia Corp.'s five-year credit default swaps jumped 14 basis points to 82 basis points Monday, the largest single-day increase since the contract began active trading in November, according to ICE Data Services. The move came after the chipmaker disclosed a $500 billion-plus partnership with South Korea's SK Group and confirmed it is in talks to backstop as much as $250 billion to help OpenAI lease computing capacity from a US data center project.
"The scale of capital required to build AI infrastructure is enormous, and the debt market is absorbing a supply shock," said Sal Naro, chief investment officer at Coherence Credit Strategies. "The concern is that opaque financial structures, off-balance-sheet transactions and complex inter-affiliate relationships could create financial alchemy that ultimately leads to credit rating downgrades."
Nvidia shares closed at $4.78 trillion in market value, ceding the title of the world's most valuable company to Apple Inc., which rose 1.2% to $4.93 trillion. Apple has gained 24% this year, outperforming the so-called Magnificent Seven, as its restrained approach to AI capital spending gains favor with investors. The Cupertino, California-based company's capital expenditures have declined for three consecutive quarters, a stark contrast to peers racing to build out AI infrastructure.
The AI capex divide widens
The divergence between Nvidia and Apple reflects a deepening schism over how to finance the AI buildout. Alphabet Inc. last week raised its full-year capital expenditure guidance to support AI infrastructure, yet its stock is up only about 3% year-to-date. Tesla Inc., which is increasing spending on Robotaxi and robotics initiatives, has tumbled nearly 30% in 2026. Both companies' shares fell after their respective earnings reports.
Such large-scale financing typically requires investment-grade credit ratings, which AI companies like OpenAI and Anthropic PBC — still in heavy cash-burn phases — cannot obtain independently. That means Nvidia and other large technology firms must provide the credit backing that allows these deals to achieve high-grade ratings, effectively tying the chipmaker's balance sheet to its customers' expansion plans.
Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. are all expected to report earnings this week, with each projected to announce further increases in AI-related spending. Apple reports Thursday after the close, where investors will focus on the rollout of its Apple Intelligence features and whether the company can scale AI without meaningfully increasing capital expenditure or compressing operating margins.
Thursday's call will also be the last for Chief Executive Officer Tim Cook, who steps down Sept. 1 to become executive chairman. John Ternus, a veteran of Apple's hardware engineering team, will take over as CEO.
Nvidia shares now trade at roughly 35 times forward earnings, a premium that reflects the market's expectation that AI infrastructure spending will continue to accelerate. The CDS spike suggests credit investors are pricing in a scenario where that spending creates financial strain — not just for Nvidia's customers, but for Nvidia itself as it becomes the de facto guarantor of the AI industry's debt.
This article is for informational purposes only and does not constitute investment advice.
