Nasdaq 100's AI Debt Tab Comes Due as Investors Rotate to Safety

The Nasdaq 100 shed 2.5% and closed at 29,187.55 points, with the selling pressure concentrated squarely on the growth names that have powered the index's run — but the more telling signal came from the credit market, where the cost of insuring against default on some of the world's largest technology companies has surged.

Protection costs on Microsoft, Nvidia and Amazon debt have in some cases more than doubled since autumn 2025, according to Bloomberg Law. Credit default swaps, which pay out if a borrower fails to meet its obligations, are not flashing imminent default. What they are doing is telling investors that the price of carrying this risk has climbed sharply as the debt financing the artificial intelligence buildout balloons.

That concern is no longer confined to the specialised data-centre operators. CoreWeave remains the epicentre of the nervousness: CNBC reports that the cost of five-year credit default swaps on the company pushed past 1,000 basis points and rose 19% in a single week, while Reuters points to worries over its heavy funding needs and the risk that graphics processors could become obsolete before the data centres housing them are even completed. Yields on CoreWeave's bonds now sit above 15%, per Reuters — evidence that the unease has spread well beyond the equity market.

The scale of the spending behind all this is staggering. Bloomberg Intelligence estimates that annual capital expenditure across the major cloud providers is approaching $1 trillion, a substantial share of it debt-financed. Goldman Sachs analysts, cited by Reuters, expect five large AI hyperscalers to lift their combined investments to roughly $1.2 trillion next year. Such forecasts describe an enormous buildout, yet they leave unanswered the question of what earnings it will ultimately generate.

A Rotation, Not a Stampede for the Exits

Wednesday's move had a distinct character. Money flowed out of technology and into defensive healthcare names, which touched record highs even as the index fell — a divergence that separates this from a blanket retreat from equities. Within the tech complex, though, there was little shelter: software, semiconductor and hardware names all came under simultaneous pressure.

The market's reaction to recent results underscores how high the bar has risen. ASML posted record quarterly revenue and TSMC delivered a record profit, yet neither stock could hold onto its gains. Strong numbers, on their own, no longer appear sufficient to dispel doubts about where AI investment is heading. Broadcom chief executive Hock Tan added his voice to the scepticism, criticising inflated expectations among AI investors in Singapore, according to Fortune — a warning that shifts the focus from growth to profitability.

Rates and Oil Tighten the Squeeze

Macro forces are compounding the pressure. Supply fears in the Middle East drove energy prices higher, feeding inflation worries, while clear guidance on interest rates was notably absent: Fed Chair Kevin Warsh offered no concrete signal on the next policy decision. Barclays now expects two 25-basis-point rate hikes, in December and January — a house forecast rather than any announced move by the US central bank, whose next meeting runs 27–28 October.

Against that backdrop, the coming earnings season becomes a critical test. Hargreaves Lansdown anticipates broadly strong results from US technology firms, though with bond yields elevated, they will need to beat expectations and raise their guidance to satisfy investors. Netflix reports on 20 October and Tesla on 21 October; Meta, Lam Research and Texas Instruments are also in focus, according to Reuters. The figures themselves matter less than the outlooks and the case companies make for the economic payoff from their spending.

The index's slide reflects a shift in how the market keeps score. Growth and ambitious expansion plans no longer suffice on their own — not while capital needs keep climbing and the cost of funding them rises. Until technology firms can back their appeal with durable results and credible investment plans, defensive sectors look the more persuasive bet.