The average spread of five-year CDS for Microsoft, Alphabet, Amazon, and Meta has risen from approximately 41 basis points at the end of 2025 to nearly 68 basis points; during the same period, the North American investment-grade CDX index only rose from approximately 50 to 53 basis points. This indicates that the bond market is not universally concerned about corporate credit, but rather is specifically increasing risk compensation for hyperscale cloud vendors.
The bullish logic lies in the continued supply shortage of GPU computing power, leading to significant increases in some leasing prices. As old contracts expire and are repriced, cloud revenue and operating cash flow may accelerate, providing more internal funding for AI capital expenditures. However, spot prices being higher than long-term contracts does not mean that all existing computing power will rise in price simultaneously: discounts from major customers, chip iterations, and new supply may all limit the room for price increases. Meanwhile, the capital expenditures of the five major cloud vendors are projected to exceed $690 billion in 2026, and the proportion of debt financing is also increasing.
Therefore, this widening of spreads is more like a repricing of business models.
The bond market needs to verify whether the increase in computing power prices and cloud revenue growth can outpace capital expenditures, depreciation, and financing costs. Key metrics include operating cash flow covering capital expenditures, computing power utilization, and whether contract repricing can translate into profits.
