Nvidia CDS surges 0.14 point as $750B AI deals stoke debt fears

The price of protecting Nvidia Corp.'s debt against default for five years surged as much as 0.14 percentage point to 0.82 percentage point annually on Monday, the largest intraday rise since the credit-default swaps began actively trading in November 2025, according to ICE Data Services.

"The market is pricing in a material increase in Nvidia's leverage as it moves from being a chip supplier to a financial guarantor of data center projects," said Toshiya Hari, an analyst at Goldman Sachs. "The circularity risk — where Nvidia guarantees financing that its customers use to buy its own chips — is a legitimate concern for credit investors."

The jump followed reports that Nvidia is in discussions on more than $750 billion of AI infrastructure deals, including a potential $250 billion data center financing guarantee with OpenAI. The company's outstanding long-term debt stood at roughly $11 billion as of its most recent filing, meaning the new obligations could represent a more than 60-fold increase in its debt-like commitments if fully realized. The CDS move pushed Nvidia's credit spreads to levels more typical of companies with lower investment-grade ratings, traders said.

The widening signals that bond investors are reassessing Nvidia's risk profile as it transitions from a pure-play chip designer into a financier of the AI buildout. If the trend persists, higher borrowing costs could pressure Nvidia's margins and dampen the enthusiasm that has driven its market capitalization above $5 trillion. The company's next earnings report, expected in late August, will provide the first formal update on the scale of any guaranteed commitments.

The selloff in Nvidia's credit protection accelerated through the afternoon session in New York, with trading volumes in the CDX IG 28 index — a benchmark for investment-grade credit — also picking up as dealers hedged their exposure. The broader market for AI-related credit has been under scrutiny since June, when Moody's flagged that contingent liabilities from data center financing could strain even the strongest balance sheets.

Nvidia's potential $250 billion commitment to OpenAI would represent the largest single corporate financing guarantee in history, surpassing the $108 billion that SoftBank Group Corp. pledged for its Vision Fund in 2017. Unlike SoftBank's equity-based model, Nvidia's guarantee would be tied to hardware procurement, creating a direct link between the company's credit quality and its own product sales.

The circular financing concern is not new to the AI sector. In April, Microsoft Corp. disclosed $50 billion in data center lease commitments, and Amazon.com Inc. has pledged similar sums. But Nvidia's role as both supplier and guarantor introduces a concentration risk that credit investors have not previously priced, according to a note from Barclays Plc.

Samsung Electronics Co.'s announcement on Saturday of a $200 billion partnership with Broadcom Inc. for custom AI chips adds another dimension to the competitive landscape. While Samsung's deal is a manufacturing pact rather than a financing guarantee, it shows the scale of capital commitments reshaping the semiconductor industry.

For Nvidia, the stakes are existential. The company's data center revenue has grown more than 200 percent year-over-year for three consecutive quarters, and guaranteeing customer financing ensures demand for its next-generation Rubin architecture chips, which Japan agreed to purchase earlier this month for sovereign AI development. But the strategy also exposes Nvidia to counterparty risk if AI startups fail to generate returns on their infrastructure spending.

The CDS market's reaction Monday suggests that some investors believe the risks are beginning to outweigh the rewards. If credit conditions tighten further, Nvidia may need to tap equity markets or scale back its guarantee ambitions — either of which could weigh on its stock, which has already fallen 8 percent from its June peak.

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