According to reports from CNBC, 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, including Amazon, Microsoft, Google, and Meta, face a credit default swap (CDS) gap against bank debt, widened to about 60 basis points since October 2025. As reported by CNBC, Slok made the case that the market is repricing hyperscaler credit fundamentals, namely a debt-financed AI capex cycle with rising leverage, negative free cash flow and uncertain payback on depreciating assets.
According to reports from CNBC, Dan Alpert, founding managing partner of Westwood Capital, compared the setup to the run-up to the 2008 mortgage crisis. He noted that 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. As reported by CNBC, Slok's note follows a weekend call from leading AI labs to slow model development over safety concerns, which could squeeze demand for the computing power hyperscalers are financing.
According to FactSet data cited in Slok's note, Alphabet and Meta each carry negative forward free cash flow near $25 billion, while Amazon's runs near $30 billion. However, Microsoft remains cash flow positive. As reported by CNBC, 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.
According to CNBC, 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, argued that CDS investors are betting against the AI companies, doubting they can deliver on commitments funding their debt. Whether the widening CDS spreads mark an early warning or a temporary repricing remains unclear, with the answer potentially hinging on how quickly AI revenue catches up to the spending it funds.
