After a significant rally in AI-related assets, investors are buying more protection against a potential downturn. The hedging comes as technology stocks sell off and concerns grow over the massive capital expenditures needed to build out AI, raising questions about whether future profits will justify the costs.
Put-option volume on CoreWeave, an AI cloud infrastructure provider, has reached a record. Meanwhile, the cost of insuring debt through credit-default swaps (CDS) has climbed to its highest point since 2021 for major cloud providers Amazon, Alphabet, Microsoft, Meta, and Oracle, signaling broad concern about financial risk in the sector.