Investor concerns over Alphabet Inc.'s debt-funded AI spending intensified on Thursday, driving up the cost of insuring against potential losses on the company's debt. The price of five-year credit default swaps for Google's debt surged as much as 5.3 basis points to 84 basis points a year, marking the largest increase since September 21, according to ICE Data Services.
The rise in debt-risk gauge came as Google's shares tumbled following disappointing earnings results. The report fueled fears that the company's massive investments in AI may not yield the expected returns, raising questions about the sustainability of its debt-funded strategy.
The uncertainty extended beyond Google, with other tech giants also feeling the ripple effects. Costs of insuring debt rose for Meta Platforms Inc. and Broadcom Inc., reflecting broader jitters in the tech sector about AI-related spending and its long-term viability.