🦔The cost of insuring Big Tech debt against default just hit record highs. Credit default swaps are insurance policies investors buy when t…

🦔The cost of insuring Big Tech debt against default just hit record highs. Credit default swaps are insurance policies investors buy when they think a company might not pay back what it borrowed. When that insurance spikes, lenders are getting nervous. CDS prices for Oracle, Nvidia, Alphabet, Amazon, Meta, SpaceX, and Broadcom are all at or near records. Oracle is the worst off, now one notch above junk after S&P downgraded it in July. My Take Hyperscaler capex is up 84% from a year ago and now eats 98% of cash flow from operations. Almost every dollar these companies generate goes straight back into chips, data centers, and power. There's nearly nothing left for buybacks, dividends, or the cushion that used to justify their credit ratings. The Mag 7 lost 2.3 trillion in market cap in June alone, and another 800 billion in a single session on July 23 after Alphabet posted negative free cash flow and raised capex guidance to 205 billion. Microsoft is down over 20% this year. Apple, the one company that mostly sat out the AI spending race, is up 18%. Half of Oracle's 638 billion in customer commitments come from OpenAI, which still burns cash. Oracle has 167 billion in debt, negative free cash flow of 23 billion, and it cut 21,000 jobs to help fund the buildout. S&P moved it to one notch above junk. If OpenAI stumbles, Oracle is stuck with empty data centers and the debt it borrowed to build them. Société Générale's advice to investors was to pay less attention to earnings and more to the credit default swap market. I agree with them. Hedgie🤗

Source: Gary Marcus (X) | 2026-07-28

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