Boaz Weinstein’s Saba Capital Management has been actively selling credit protection on big tech names as lenders and asset managers rush to hedge growing concerns around the sector’s debt-fuelled AI spending spree, according to a report by Reuters.
There report cites an unnamed person with direct knowledge of the trades as revealing that in recent months, Saba has sold credit default swaps on Oracle, Microsoft, Meta, Amazon and Alphabet to banks seeking to insure against rising leverage across the AI complex. Several large asset managers – including at least one private credit fund – have also been buyers, the source said.
The trades mark the first time banks have approached Saba for protection on some of these companies, reflecting a shift in how credit markets are thinking about hyperscaler risk. With AI capex accelerating and bond issuance surging, lenders are increasingly looking for ways to offset exposure should the current enthusiasm unwind.
The hedging flows mirror what equity derivatives desks have been reporting: broad-based demand for downside protection tied to AI-linked names. Recent notes from Goldman Sachs and Deutsche Bank highlight concerns around an expanding pipeline of tech-related corporate bond supply and the use of CDS as a macro hedge for crowded long-AI positioning.
Despite that, Big Tech CDS levels remain low versus other investment-grade sectors, underscoring the tension between balance-sheet strength and bubble-risk anxiety. Oracle and Alphabet CDS spreads have climbed to two-year highs, while Meta and Microsoft spreads have jumped sharply in recent weeks, according to S&P Global data.
The backdrop is a surge in hyperscaler borrowing. Meta raised $30bn of debt in October, Oracle tapped the market for $18bn in September, and Alphabet has issued heavily as well — driving more than twice the sector’s typical annual IG issuance in just two months, Bank of America data shows.
Some strategists argue that valuations still underestimate the risk embedded in AI capex cycles. BofA’s Michael Hartnett last week described “AI hyperscaler corporate bonds” as the market’s best short, while others, including Citi, point to still-healthy balance sheets and spreads that trade inside the broader IG universe.
