The cost of insuring Oracle's debt hit a record, CoreWeave's bonds traded at 77 cents on the dollar and South Korea's market tripped a circuit breaker as the stress spread across Asia.
Equity investors have been questioning the economics of the artificial-intelligence buildout for weeks. On Wednesday and overnight, the question reached the credit market.
The cost of five-year credit default swaps on Oracle debt rose 26 basis points to a record 288 basis points, according to S&P Global Market Intelligence data. SoftBank Group's swaps rose 24 basis points to 424. CoreWeave's widened past 1,000 basis points, according to LSEG data, and its bonds due 2032 traded around 77 cents on the dollar. Default-swap spreads for Amazon, Alphabet, Meta Platforms and Nvidia also reached record wides, though at far lower levels.
The equity damage
Wednesday's stock losses were heaviest at the companies borrowing to build AI capacity. CoreWeave closed down 15.5% at $65.78 and was indicated about 6% lower before the open Thursday, and Oracle closed down 8.8%. What changed overnight is that the selling spread beyond U.S. equities.
Asia followed. South Korea's Kospi fell 7.6% to 5,554.22, its seventh straight decline, after triggering a circuit breaker for the first time since July 29. Samsung Electronics fell 9.5% and SK Hynix 11.1%. Japan's Nikkei 225 closed down 4.9% at 64,425.95, and Taiwan's main index fell 3.4%. Nasdaq 100 futures were down about 1.2% early Thursday.
Why credit matters
Much of the AI data center buildout is financed with debt, especially at specialized cloud providers. When yields rise and lenders demand more protection, the cost of building the next round of capacity rises with them. That turns a debate about valuations into a debate about funding.
Rates were part of the trigger. Wednesday's hotter core inflation reading briefly pushed the 10-year Treasury yield above 5.3%. But longer-term Treasury yields ended the day lower, and the dollar and Fed hike odds fell overnight, while single-name credit spreads kept widening, which some investors read as a sign of stress specific to AI financing rather than a simple rates move.
Two interpretations
The first is that this is a repricing of the cost of capital, not a break in the business. Taiwan Semiconductor Manufacturing reported record quarterly profit overnight, up 69%, and described AI demand as "extremely robust." A strategist at Saxo described the move as a "repricing of the cost of capital," and Mark Matthews, head of Asia research at Julius Baer, said: "I'm not worried."
The second is that the stress is concentrated where the leverage is. Debt-funded data center builders face higher refinancing costs just as the market questions their borrowing. Seo Sang-young of Mirae Asset Securities said markets are reacting to "whether capital raising will be sustainable," and JPMorgan analysts pointed to "financing risks and IPO timelines" as the central issue.
What to watch
Whether investment-grade and high-yield index spreads follow single-name swaps wider when U.S. trading opens, any new financing or rating action at CoreWeave or Oracle, and earnings guidance from the companies that buy AI capacity.