Hyperscaler debt signals warning sign, Apollo cautions

An aerial view of an Equinix data center in Ashburn, Virginia, on Aug. 26, 2026.Anna Moneymaker | Getty ImagesCorporate debt issued by the giant cloud computing players powering the artificial intelligence boom is getting riskier, private equity firm Apollo Global Management warned on Wednesday.Risk insurance contracts, known as credit default swaps (CDS), for bonds issued by hyperscalers are getting pricier, and it's not because banks are hedging more of their bets as bond issuance climbs, Apollo chief economist Torsten Slok wrote in a Wednesday note."What the market is repricing is hyperscaler credit fundamentals, namely a debt-financed AI capex cycle with rising leverage, negative free cash flow and uncertain payback on depreciating assets," Slok wrote.If dealer hedging of new bonds were responsible for the rise in risk insurance prices, that widening would show up in the issuers of those bonds – the banks. But that's not what's happening.Widening gapThe gap between hyperscaler CDS and bank CDS has widened to around 60 basis points from roughly 0 since October of 2025, implying that hyperscaler credit risk is increasing on its own terms, Slok's research shows.The note from Apoll...