AI investors rush to hedge trillions-dollar bet as market skepticism rises
With AI stocks facing losses and expectations unmet, Wall Street players deploy options and credit swaps to protect against a broader unraveling.
What to know
- Investors are buying record volumes of put options and credit-default swaps to hedge against further losses in the AI trade, even as trillions remain at stake.
- Credit costs for major hyperscalers including Amazon, Alphabet, Microsoft, Meta, and Oracle have risen to their highest levels since 2021, signaling broad market concern about AI sustainability.
- Some recent AI bets have already failed to meet market expectations, and major tech stocks posted steep one-day losses this week, causing formerly bullish investors to seek protection.
“These people have made so much money, they're quitting to hedge their stock.”
Stephen Solaka, Senior Vice President at Gateway Investment Advisers · Hindustan Times ↗
Stephen Solaka Senior Vice President at Gateway Investment AdvisersDave Olsen President of Jump TradingEugene Grinberg Co-founder of Solve (bond data provider)
How it unfolded 1 development · click the chart to see its coverage articles
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Credit costs for AI hyperscalers widen to highest levels since 2021 — The cost to protect against debt default in Amazon, Alphabet, Microsoft, Meta, and Oracle widened over the past month to levels not seen since 2021. Oracle's credit-default spreads widened by more than 1 percentage point, signaling broad market concern about the entire AI infrastructure sector.
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Jump Trading launches computing power trading desk for AI hedges — The quant trading firm opened a new desk to capitalize on price inefficiencies in computing power across providers and structure over-the-counter derivatives for those hedging against a sharp collapse in AI infrastructure prices.
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CoreWeave put options hit record levels amid hedging wave — Put option contracts tied to AI neocloud company CoreWeave surged to the highest level on record this month, with popular bets targeting $35 strike prices while shares hovered around $55.
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Tech stocks record steep losses as AI enthusiasm fades — Major tech stocks including Alphabet and Intel posted some of their biggest one-day drops ever. The tech-heavy Nasdaq fell 2.9% on Friday, capping its worst month since March 2025.
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AI investors buying downside protection as market skepticism grows
Wall Street investors and tech executives are increasingly turning to options, credit-default swaps, and derivatives to hedge against losses in the AI trade. Put option volumes on companies like CoreWeave have surged to record levels, while credit-default swap spreads on major hyperscalers have widened to their highest levels since 2021.
“We're seeing really significant demand from folks looking to protect downside.”
— Stephen Solaka, senior vice president at Gateway Investment Advisers -
first by Hindustan Times, 10d ago · also WSJ, WSJ Markets
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