The "money-burning" effect of AI is spreading: North American tech giants' CDS soared across the board in July, with a significant increase in the risk premium required in the credit market.

EB SECURITIES published a research report stating that recently, the credit default swaps (CDS) of North American tech giants have widened rapidly, raising market concerns about the high capital investment and financing sustainability of AI infrastructure. Overall, the current data shows three main characteristics: first, since July, the CDS of North American tech giants have generally widened, indicating that the market is pricing in higher credit risks for related companies; second, there is a significant differentiation in the bond issuance costs of different companies, with Amazon's bond issuance spread slightly widening from March to July; third, the capital expenditure of North American tech giants is expected to remain robust in 2026, but the year-on-year growth rate may slow down in 2027. These changes indicate a growing market focus on investment returns, cash flow coverage, and financing arrangements, with the credit market demanding higher risk compensation for the high capital investment model in AI. Continued observation of CDS, credit spreads, capital expenditure rhythms, and cash flow realization from AI businesses is necessary. Incident: Recently, the credit default swaps (CDS) of North American tech giants have widened rapidly, prompting market concerns about the high capital investment and financing sustainability of AI infrastructure. CDS reflects the cost investors need to pay to hedge against corporate credit risks, and its rise indicates an increase in the required credit risk compensation by the market. We have compiled the 5-year CDS trends of companies such as Microsoft, Amazon, Alphabet, Meta, Oracle, Nvidia, and SpaceX, alongside the capital expenditure growth rates of major North American tech giants and the bond issuance costs of approximately 10-year bonds this year, to observe the changes in credit market risk pricing for related companies. Since July, the 5-year CDS of North American tech giants has generally increased significantly. From early 2025 to the first half of 2026, most companies, except Oracle, have CDS levels within the 30-60 bp range; however, starting in July 2026, various companies CDS have widened to varying degrees. Among them, Oracle's latest CDS has risen to above 200 bp, SpaceX to about 180 bp, and Meta, Broadcom, and Nvidia have quickly increased to 75-100 bp, while Alphabet, Amazon, and Microsofts CDS have also risen concurrently. The upward trend in credit risk pricing has expanded from a few companies to multiple core companies in the AI supply chain, reflecting a recent heightened concern in the North American bond market regarding the risks associated with these companies. Notably, on July 30, there was a slight decrease in the CDS of the aforementioned companies. The financing interest rates for 10-year bonds of tech giants range from 4.83% to 5.90%, with issuance spreads of 50-145 bp. Nvidia and Alphabet have the lowest issuance spreads at 50 bp and 63 bp, respectively, while Oracle, SpaceX, and Salesforce have the highest, reaching 145 bp, 140 bp, and 135 bp, respectively. The different issuance yields and spreads of various companies are influenced by factors such as credit ratings, balance sheet quality, timing of issuance, bond terms, and market supply and demand, with horizontal differences reflecting the varying credit qualities and risk pricing of each company. Amazon's bond issuance costs in July saw a slight increase compared to March. The 10-year bond that Amazon issued in March 2026 had an issuance yield of 4.90% and an issuance spread of 75 bp; the yield for the 10-year bond issued in July increased to 5.34%, and the issuance spread rose to 80 bp. Between the two issuances, the yield rose by approximately 44 bp, and the credit spread widened by 5 bp, indicating that the changes in absolute financing costs were primarily influenced by the changes in benchmark U.S. Treasury rates during the same period, with a slight upward adjustment in credit risk compensation. The capital expenditure of North American tech giants is still in a phase of rapid expansion. Since 2024, capital expenditures by Microsoft, Amazon, Google, Meta, and Oracle have significantly accelerated, with the combined capital expenditure of the five companies in 2026 expected to see further acceleration in year-on-year growth. The continued strong investments in AI infrastructure are supporting demand in industries related to computing power, networks, and data centers, while also making the market more attentive to the return cycles of these investments, cash flow coverage capabilities, and subsequent financing arrangements.