Google's credit risk indicator is rising. What are investors worried about?

The cost of five-year credit default swaps (CDS) on Google's debt rose by 5.3 basis points to 84 basis points per year, according to ICE Data Services, Bloomberg reports. This is the largest increase since September 21.

The cost of default insurance has also risen for other companies, including Meta Platforms—the AI developer and owner of Facebook—as well as chipmaker Broadcom. The cost of CDS rises when investors assess a company’s risk of default as higher.

Google’s parent company, Alphabet, reported third-quarter revenue on October 28 that fell short of analysts’ expectations. The company reported that its free cash flow was negative for the second consecutive quarter, with a deficit of $9.1 billion, compared to $5.9 billion in the second quarter. Alphabet’s long-term debt rose 479% over the past year—from $21.6 billion to $125.1 billion. In addition, the advertising business—whose revenue is crucial for financing Alphabet’s large-scale investments in artificial intelligence— posted its lowest growth rate in more than a year.

If investments in AI pay off, shareholders could reap huge profits, but if the situation takes a turn for the worse, debt holders will bear the brunt of the losses, explained Gavin Nolan, executive director of fixed-income pricing at S&P Global Market Intelligence. According to him, bond investors are paying close attention to capital expenditures and to when AI revenue will begin to generate positive free cash flow. “In a sense, the credit market tells a slightly different story about the technology sector than the stock market does,” Nolan told Bloomberg.

Trading volume in credit default swaps (CDS) linked to the debt of the 10 largest hyperscalers and chip manufacturers has increased more than eightfold since the beginning of the year through the end of last week, reaching $176 billion. This is according to an analysis of trade repository data conducted by Barclays credit strategist Jigar Patel. Some of these instruments, such as CDSs on SpaceX’s debt, have only begun trading in recent months.

According to Patel, swaps on the debt of cloud giant Oracle are the most actively traded. Trading volume for these swaps in 2026 increased nearly sixfold compared to last year, reaching $46.8 billion. Over the past 12 months, the company’s stock has fallen by nearly 50% as the market reacts to its high debt levels. As of the end of August, Oracle’s debt stood at about $125 billion. In the previous fiscal year, the company raised $43 billion through bond issuances and plans to raise another $40 billion or so through debt and equity financing this fiscal year. The company has already raised half of that amount—$20 billion—from the sale of shares.

This article was AI-translated and verified by a human editor