The AI story is no longer being judged only by earnings. Investors are increasingly watching whether massive AI spending can be financed without weakening corporate balance sheets.

Credit markets are sending a different message than the stock market

Monday's technology selloff highlighted a shift in investor focus. NVIDIA Corporation(NVDA.US) shares fell nearly 5%, while Apple Inc.(AAPL.US) gained more than 1%, allowing Apple to reclaim the title of the world's most valuable listed company based on market capitalization during the session.

Behind the stock moves, another market attracted growing attention: credit default swaps (CDS).

A CDS is essentially insurance against a company defaulting on its debt. When CDS prices rise, investors are demanding more compensation to insure that company's bonds, suggesting higher perceived credit risk.

NVIDIA Corporation(NVDA.US)'s five-year CDS reportedly jumped to around 82 basis points during Monday's session—its largest intraday increase since the contract became actively traded last year. For illustration, insuring $10 million of Nvidia debt for five years would cost roughly $82,000 annually at that level.

Manish Kabra, Head of U.S. Equity Strategy at Société Générale, argued that investors should increasingly monitor companies' credit profiles rather than focusing solely on earnings, saying, "For the hyperscalers, watch CDS, not EPS."

The change is notable because NVIDIA Corporation(NVDA.US) remains one of the world's most profitable semiconductor companies, reporting fiscal 2026 revenue of $215.9 billion, net income of roughly $120 billion, and free cash flow approaching $97 billion. The concern is not its current profitability, but whether expanding financial commitments tied to AI infrastructure could increase future balance-sheet risk.

Why investors are questioning AI financing

According to reports published on July 26, NVIDIA Corporation(NVDA.US) has been discussing financial support arrangements linked to OpenAI's future computing infrastructure.

Among the reported discussions:

• Around $250 billion of financing guarantees tied to a large Ohio data center project backed by SoftBank.
• Separate discussions involving financing for additional OpenAI chip purchases reportedly worth $350 billion.
• Earlier announced cooperation with SK Group on AI infrastructure.

Taken together, the potential scale of these projects runs into the hundreds of billions of dollars.

The comparison attracting investors' attention is straightforward. At the end of fiscal 2026, Nvidia held approximately $62.6 billion in cash and marketable securities. A reported $250 billion guarantee would therefore be several times larger than its cash holdings.

Credit investors are focused on what some market participants describe as a financing loop: technology companies provide financing or guarantees that help AI developers build infrastructure, while those same customers subsequently purchase chips, cloud services or computing capacity from the guarantors.

Gary Tan, portfolio manager at Allspring Global Investments, said more capital is increasingly being directed toward funding future AI customers and infrastructure deployment.

Sal Naro, Chief Investment Officer at Coherence Credit Strategies, warned that increasingly complex financing structures, off-balance-sheet arrangements and interconnected corporate relationships could eventually place pressure on credit ratings.

Nvidia CEO Jensen Huang has previously rejected concerns that investments in AI infrastructure amount to circular financing, arguing earlier this year that such investments support both Nvidia's business and its investment returns.

The concern is spreading beyond Nvidia

Credit investors are not looking only at NVIDIA Corporation(NVDA.US).

According to market data cited in the article, CDS prices for several major AI-related companies—including Oracle Corporation(ORCL.US), Alphabet Inc. Class A(GOOGL.US), Amazon.com, Inc.(AMZN.US), Meta Platforms(META.US), Broadcom Limited(AVGO.US) and SpaceX(SPCX.US)—have also climbed toward record highs.

Oracle faces the greatest rating pressure

Oracle Corporation(ORCL.US) has drawn particular attention after S&P Global Ratings downgraded its long-term credit rating to BBB- on July 9, leaving it only one notch above speculative-grade status.

S&P cited expectations that Oracle's fiscal 2027 capital expenditures could reach $90-95 billion, while operating cash consumption may significantly exceed previous estimates. The agency also highlighted customer concentration, noting OpenAI represents a substantial portion of Oracle's remaining performance obligations.

Oracle's five-year CDS has risen sharply this year, reflecting investors' growing concern over leverage and cash flow.

Alphabet posts record cloud growth—but spending surges even faster

Alphabet Inc. Class A(GOOGL.US)'s second-quarter results demonstrated the strength of AI demand:

• Revenue reached $119.8 billion, up 24% year over year.
• Google Cloud revenue climbed 82% to $24.8 billion.
• Cloud backlog exceeded $500 billion for the first time.

However, AI investment also accelerated rapidly.

Quarterly capital expenditures doubled to roughly $44.9 billion, while the company raised full-year capital spending guidance to $195-205 billion and indicated investment could continue increasing into 2027.

The combination of strong business momentum and sharply rising investment has become a central issue for credit investors.

Meta also faces higher financing costs

The article notes that financing costs for Meta Platforms(META.US)'s large Texas data center project have increased substantially.

John Aylward, Chief Investment Officer at Sona Asset Management, said the debt was being priced at levels comparable to lower-rated corporate bonds, adding that uncertainty surrounding AI investment timing and financing costs has created growing caution in credit markets.

George Catrambone, Head of Fixed Income Americas at DWS Group, said investors are increasingly using CDS to hedge against potential rating downgrades as companies continue issuing large amounts of debt to fund AI expansion.

Why Apple is benefiting from a different strategy

Apple Inc.(AAPL.US) has largely taken the opposite approach.

While many large technology companies are committing enormous capital to AI infrastructure, Apple has generally favored renting computing capacity instead of aggressively building its own.

Capital expenditure has declined over the past several quarters, helping Apple avoid the financing concerns currently weighing on many AI infrastructure leaders.

Jay Woods, Chief Global Strategist at Freedom Capital Markets, said Apple had previously been criticized for moving too slowly on AI, but that more disciplined capital spending now appears to have shielded it from what he described as the current capital expenditure trap.

Year to date, the article notes Apple shares have gained about 24%, compared with roughly 4% for Nvidia.

What investors should watch next

The debate surrounding AI is shifting from whether demand exists to how that demand is financed.

Several upcoming developments could help determine whether current concerns ease or intensify:

• Apple Inc.(AAPL.US)'s upcoming earnings could reveal whether rising memory costs are beginning to pressure hardware margins and whether management changes its outlook for future profitability.
• CDS movements at NVIDIA Corporation(NVDA.US), Oracle Corporation(ORCL.US), Alphabet Inc. Class A(GOOGL.US) and Meta Platforms(META.US) may indicate whether credit investors are becoming more or less comfortable with AI spending.
• NVIDIA Corporation(NVDA.US)'s reported financing discussions with OpenAI could provide greater clarity on how much balance-sheet support the company is ultimately willing to provide.
• Future regulatory and infrastructure developments, including power availability for major AI data centers, could influence the pace of AI expansion.

For now, equity investors remain focused on AI growth, while credit markets are asking a different question: Can companies continue funding unprecedented AI investment without weakening their financial foundations?

Disclaimer: This article is for informational purposes only and does not constitute investment advice.