Apollo Global Management warned Wednesday that credit default swaps on hyperscaler debt are pricing in more risk. Chief economist Torsten Slok tied the shift to weakening credit fundamentals rather than routine bond-dealer hedging.
Hyperscalers are the cloud computing giants, including Amazon, Microsoft, Google, and Meta, that run the infrastructure behind the AI boom. They face a credit default swap (CDS) gap against bank debt, widened to about 60 basis points since October 2025.
Debt-Financed AI Buildout Draws 2008 Comparisons
Slok made the case in a Wednesday note reported by CNBC.
“What the market is repricing is hyperscaler credit fundamentals, namely a debt-financed AI capex cycle with rising leverage, negative free cash flow and uncertain payback on depreciating assets.”
Dan Alpert, founding managing partner of Westwood Capital, compared the setup to the run-up to the 2008 mortgage crisis. He said banks have since built far bigger equity buffers and are more diversified than they were then.
The comparison recalls “The Big Short,” the film chronicling investors who spotted mortgage bond mispricing years before the 2008 crash.
Slok’s note follows a weekend call from leading AI labs to slow model development over safety concerns. That shift could squeeze demand for the computing power hyperscalers are financing.
A Creaking Market
Analysts have separately flagged similar warning signs in the private credit market, where cracks are also drawing 2008 comparisons.
The pattern echoes how AI debt pushed yields toward multi-year highs earlier this year.
Not everyone agrees the risk has crystallized. Paul Meeks, head of technology research at Freedom Capital Markets, said hyperscaler margins are already improving as capacity additions slow.
Dean Baker, founder of the Center for Economic and Policy Research, said CDS investors are betting against the AI companies. He argued they doubt the companies can deliver on the commitments funding their debt.
Alphabet and Meta each carry negative forward free cash flow near $25 billion, while Amazon’s runs near $30 billion. Microsoft remains cash flow positive, according to FactSet data cited in Slok’s note.
Whether the widening CDS spreads mark an early warning or a temporary repricing remains unclear. The answer may hinge on how quickly AI revenue catches up to the spending it funds.
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