AI infrastructure spending spree continues to weigh on credit profiles! Meta (META.US) credit risk gauge hits a record high, while CDS for Microsoft Corporation, Oracle Corporation, and Broadcom Inc. also heat up in tandem.

Thursday, the credit risk gauge for Meta Platforms Inc. (META.US) surged to a new record high, with the company's bonds weakening in tandem, as its plan to expand capital expenditures reignited market concerns that tech giants will issue more debt to build AI in an already saturated market. According to ICE Data Services, the price of five-year credit default swaps on the company's debt rose by as much as 8.9 basis points to about 119.3 basis points per year. Credit default swap prices rise as investor concerns intensify. This was the highest intraday level since the swap contract began actively trading about a year ago. On Thursday, the cost of related debt protection for other hyperscalers and chipmakers also rose, including credit default swaps tied to Oracle Corporation (ORCL.US), Microsoft Corporation (MSFT.US), and Broadcom Inc. (AVGO.US). Meta said it has agreed to spend approximately $825 billion in the future on various leases and contracts, many of which are related to AI computing power and infrastructure. In July of this year, Meta disclosed future spending commitments of nearly $700 billion. The company also raised the lower end of its capital expenditure forecast for this year to $135 billion to $145 billion from its previous range of $130 billion to $145 billion. The company did not provide capital expenditure guidance for next year. Meanwhile, free cash flow turned negative in the quarter, at negative $2.12 billion. According to company presentation materials, it was positive $784 million in the second quarter and positive $10.625 billion in the third quarter of last year. In addition to the rise in credit default swap prices, the company's bonds weakened relative to U.S. Treasuries. According to Trace data, the risk premium on its 5.25% coupon bonds maturing in 2036 widened by 0.06 percentage points, or 6 basis points, to 1.2 percentage points.