Nvidia CDS Reaches a Record High
Nvidia’s five-year credit default swap climbed to a record 82 basis points on Monday, July 27, according to ICE Data Services.
The increase marked the contract’s largest single-day intraday move since it began trading actively in November 2025.
Credit default swaps are often used as a measure of perceived credit risk. A higher CDS level generally indicates that investors are demanding more protection against the possibility of financial stress.
Nvidia Shares Lose Nearly 5%
Nvidia shares dropped 4.99% to $196.51 on Monday.
The decline erased approximately $250 billion from the chipmaker’s market value and allowed Apple to reclaim the position of the world’s most valuable company.
Apple shares gained more than 1%, lifting its market capitalisation to approximately $4.95 trillion.
Nvidia shares were also indicated lower before Tuesday’s market open, trading near $194.84 in pre-market activity.
Reports Raise Concerns About Massive AI Financing Deals
The sharp rise in Nvidia’s CDS followed reports that the company may be considering AI infrastructure agreements worth more than $750 billion.
Bloomberg reported that Nvidia could provide a $250 billion financing guarantee to support OpenAI’s leasing of computing capacity from a planned data centre in Ohio.
A separate proposed arrangement could reportedly help finance approximately $350 billion of OpenAI chip purchases.
The negotiations were described as being at an early stage, and the reported terms have not been confirmed publicly.
Nvidia Reportedly Backs Additional Data Centre Projects
The Financial Times also reported that Nvidia is supporting a $50 billion data centre lease in Texas.
The facility would reportedly use Nvidia’s own chips, while CEO Jensen Huang is said to be using the company’s balance sheet to support broader investment in AI computing infrastructure.
The reports increased investor attention on Nvidia’s growing financial exposure to the companies purchasing its hardware.
Wall Street Watches Nvidia’s Credit Risk
Daniel O’Regan, Managing Director of Equity Trading at Mizuho, noted that Nvidia’s CDS had already risen from around 40 basis points at the beginning of July to approximately 68 basis points by the previous Friday.
The contract then increased by another 10 basis points after reports of the potential financing arrangements emerged.
The move was notable because Nvidia has traditionally been viewed as one of the world’s largest and most profitable technology companies.
Circular Financing Fears Grow
The main concern involves a practice that some credit analysts describe as circular financing.
Under this structure, Nvidia invests in customers or guarantees their debt. Those companies then use the funding to purchase Nvidia chips and computing systems.
Critics argue that such arrangements could make demand appear stronger while increasing Nvidia’s financial exposure to its own customers.
Nvidia reportedly announced more than $540 billion of similar agreements in 2026, excluding the possible new OpenAI deal.
IMF and BIS Highlight Wider AI Risks
Both the International Monetary Fund and the Bank for International Settlements have reportedly identified circular AI financing as a potential risk to the financial system.
Billy Leung, an investment strategist at Global X Management, said further guarantees connected to OpenAI data centres would deepen the vendor-financing model already attracting scrutiny.
He added that the arrangements could reflect both strong AI demand and growing financial pressure across the infrastructure buildout.
Credit Concerns Spread Across the Technology Sector
The increase in credit risk has not been limited to Nvidia.
S&P Global recently downgraded Oracle to BBB-, the lowest investment-grade rating. Oracle’s five-year CDS also widened to approximately 215 basis points.
Alphabet, meanwhile, reported negative free cash flow for the first time since its initial public offering as the company increased AI-related investment.
Hyperscaler Spending Expected to Reach $690 Billion
A FactSet analysis estimated that combined capital expenditure from Alphabet, Amazon, Meta, Microsoft and Oracle could exceed $690 billion in fiscal 2026.
That would represent annual growth of more than 80%.
The heavy spending is expected to push free cash flow for several major technology companies close to zero or into negative territory as the costs of building AI infrastructure are recorded before the expected returns.
Credit Metrics Gain Importance Over Earnings
Manish Kabra, Head of U.S. Equity Strategy at Société Générale, said credit default swap movements may now matter more than earnings per share for hyperscale computing companies.
This represents an important shift for Nvidia investors.
The company has traditionally been valued mainly as a direct beneficiary of surging demand for artificial intelligence chips. However, the CDS market is now placing greater emphasis on Nvidia’s balance-sheet commitments and financing risks.
Nvidia Stock Trades Below Its Record High
Nvidia shares are trading approximately 17% below their 52-week high of $236.54.
The company’s next major financial update will be its second-quarter fiscal 2027 earnings report, scheduled for August 26 after the market closes.
Analysts currently expect earnings of $2.08 per share on revenue of approximately $91.79 billion.
Investors are likely to pay particularly close attention to any management comments regarding financing guarantees, customer support agreements and other balance-sheet commitments.
Nvidia has not publicly confirmed the reported OpenAI financing arrangement, and the proposed deal terms remain uncertain.
