Apollo warns of rising credit risk for hyperscalers amid AI investment concerns

Apollo Global Management has issued a warning regarding the increasing credit risk associated with hyperscalers, attributing the concern to higher leverage and uncertain returns on AI investments. This development has been reflected in the rising prices of credit default swaps (CDS) for major technology companies such as Amazon, Google, Apple, Microsoft, and Oracle. According to Apollo, the CDS for these firms have surpassed 100 basis points, marking a significant rise from past levels. This trend suggests growing perceived default risk and a wider risk premium for financing substantial AI-related expenditures. The market implications of Apollo’s caution are reflected in broader financial trends. The pricing of hyperscaler bonds reveals that most 2026 issuances are currently at wider spreads than initially priced, potentially increasing financing costs. This scenario is raising concerns among market participants about the sustainability of AI investment returns and the potential for financial strain on these technology giants. As a result, there is speculation that investors might pivot towards safer assets, such as gold, amidst these uncertainties. In the prediction markets, there...