BlockBeats news: On July 28, the cost of credit protection against NVIDIA’s potential debt default rose to a record high on Monday, as markets expressed concerns that the company’s ongoing negotiations for over $750 billion in AI infrastructure deals could increase its obligations. According to ICE Data Services, NVIDIA’s 5-year credit default swap rate surged by 14 basis points to 82 basis points per year, marking the largest single-day increase since the swaps began active trading in November last year.
NVIDIA last week stated that its collaboration with SK Group, the parent company of SK Hynix, exceeds $500 billion. Additionally, NVIDIA is discussing providing up to $250 billion in guarantees for OpenAI’s leasing of U.S. data center capacity and may offer $350 billion in financing for OpenAI’s procurement of its chips.
Sal Naro, Chief Investment Officer at Coherence Credit Strategies, said that the capital expenditures required for AI infrastructure are substantial, and the bond market is facing a significant increase in new supply. Market concerns center on opaque financing arrangements, off-balance-sheet transactions, and corporate interrelationships that could lead to credit rating downgrades.
Related financing typically requires investment-grade ratings, but companies like OpenAI and Anthropic are currently burning through cash rapidly. Guarantees from large enterprises can help secure higher ratings for AI infrastructure debt; previously, Broadcom provided the majority of credit support for Anthropic’s $35 billion chip financing deal.