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(Bloomberg) \u2014 JPMorgan Chase & Co. (JPM) is offering clients a new way to bet against the debt of five hyperscalers, as investors seek more-liquid hedges amid an unprecedented borrowing spree to finance artificial-intelligence infrastructure.<\/p>\n
The bank last month launched a basket of credit default swaps in Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Oracle Corp., according to people familiar with the matter. Trades occur in $25 million increments \u2014 $5 million for each firm\u2019s swaps \u2014 said the people, who asked not to be named because the information isn\u2019t public.<\/p>\n
Hedge funds and other investors can buy the basket to express a bearish or bullish view on the CDS, the people said. Citadel Securities started making markets in November for two baskets of corporate bonds issued by four of the hyperscalers in November.<\/p>\n
A representative for JPMorgan declined to comment Monday. Representatives for the hyperscalers didn\u2019t immediately respond to requests for comment.<\/p>\n
Meta, Alphabet Join Credit-Risk Index as AI Hedging Demand Soars<\/p>\n
Wall Street is seizing on booming demand for hedges, as investors fear that breakneck borrowing by tech giants could hurt their portfolios. In the public market, participants have been scooping up CDS contracts \u2014 which would let them recoup some losses if a borrower defaults \u2014 as a hedge or side bet on firms\u2019 health.<\/p>\n
Swaps tied to single companies have gone from almost nonexistent a year ago to becoming some of the most-actively traded US derivatives contracts outside of the financial sector, according to Depository Trust & Clearing Corp.<\/p>\n
Oracle has the most-liquid investment-grade CDS, with average weekly trades of its default swaps topping $830 million, Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a recent interview.<\/p>\n
Bloomberg reported last week that JPMorgan is among investment banks that have assembled baskets of listed companies with exposure to the private credit industry, allowing hedge-fund clients to bet against the sector.<\/p>\n
More stories like this are available on bloomberg.com<\/p>\n
\u00a92026 Bloomberg L.P.<\/p>\n<\/p><\/div>\n