As hyperscalers tap out their cash flows and increasingly reach into the debt market, investors are paying for protection against the biggest private sector endeavor of the century.
Read Also: Michael Burry Warns Nvidia's 'Overreaching' Is Pushing Circular Spending to 'Biblical Proportions' Amid Surge in Credit Default Swaps From Crisis Relic to Tech Proxy A CDS operates like an insurance policy against corporate default.
A buyer pays a regular premium, quoted in basis points, to a seller who compensates them if the borrower fails to meet its obligations.
At 100 basis points, insuring $10 million of debt costs $100,000 annually.
But when perceived risk rises, demand for protection surges and spreads widen.
