--- title: "Morgan Stanley and Goldman Sachs count $9 billion a week of default insurance on AI debt" description: "Morgan Stanley and Goldman Sachs each published research this week showing investors buying insurance against the failure of the AI buildout. The Fed meets in three days, and its rate path decides who refinances the debt that funds the chips." publisher: "The Inference" section: "Economy" published: 2026-10-25T15:24:19.585Z modified: 2026-10-25T15:24:19.585Z canonical: https://theinference.org/article/morgan-stanley-and-goldman-sachs-count-9-billion-a-week-of-default-insurance-on-ai-debt language: en keywords: "Credit Markets, AI Debt, Federal Reserve, Banks, Data Centers" --- # Morgan Stanley and Goldman Sachs count $9 billion a week of default insurance on AI debt > Morgan Stanley and Goldman Sachs each published research this week showing investors buying insurance against the failure of the AI buildout. The Fed meets in three days, and its rate path decides who refinances the debt that funds the chips. Two banks did most to finance the AI buildout, and within 48 hours this week each published research showing investors insuring against its failure [1]. Weekly trading in credit default swaps, insurance against a bond issuer defaulting, on seven AI-linked issuers from [Oracle](https://theinference.org/markets/companies/oracle) to [Nvidia](https://theinference.org/markets/companies/nvidia) [averaged more than $9 billion in September](https://finance.yahoo.com/markets/options/articles/why-investors-buying-credit-default-115400301.html), [Morgan Stanley](https://theinference.org/markets/companies/morgan-stanley) counts, up from under $2 billion in July [1]. [Goldman Sachs](https://theinference.org/markets/companies/goldman-sachs) [cut its target for South Korea's memory-heavy Kospi index by a quarter this morning](https://finance.yahoo.com/markets/world-indices/articles/goldman-sachs-cuts-kospi-target-092052012.html), after a fall of more than 35% from its June peak [2]. The marginal buyer of AI chips borrows to buy them [4]. That is why the cost of insuring AI borrowers, alongside chip orders, now sets the sector's price. ## Compute became a financeable asset class Morgan Stanley puts [global data center capex at $2.9 trillion through 2028](https://cryptobriefing.com/morgan-stanley-data-center-capex-forecast/), and reckons the big cloud operators, [Amazon](https://theinference.org/markets/companies/amazon), [Microsoft](https://theinference.org/markets/companies/microsoft), [Alphabet](https://theinference.org/markets/companies/alphabet), [Meta](https://theinference.org/markets/companies/meta) and Oracle, can self-fund only about half [3]. Private credit is expected to supply about $800 billion of the resulting gap, in loans tied to specific facilities [3]. Morgan Stanley counts $466 billion of AI-linked debt issued this year through September, against $101 billion in the same months of 2025 [1]. [Goldman's](https://theinference.org/markets/companies/goldman-sachs) own tally is $489 billion as of July 22, already above the $322 billion raised in all of 2025 [4]. IO Fund, the research firm behind the analysis, says it plainly: "AI compute is becoming a financeable infrastructure asset class" [4]. *Chart: **Morgan Stanley still sees the buildout climbing, to $1.5 trillion in 2028** Columns showing Morgan Stanley's data center capex forecast rising from $850 billion in 2026 to $1.5 trillion in 2028.* *Bank forecast of global data center capex per year, billions of dollars, not reported actuals. Source: BizTechDaily summary of bank research. [5]* ## Protection costs follow the money down the chain The insurance market arrived in weeks. Trading in US corporate CDS indices has already passed its total for all of 2025, and five-year spreads sit at records for Meta, Nvidia and [SpaceX](https://theinference.org/markets/companies/spacex) [1]. The pricing follows the structure: Nvidia and the other chip suppliers are paid when chips are delivered, while the borrowers carry the multi-year contracts and the interest [4]. The ladder shows it. [CoreWeave](https://theinference.org/markets/companies/coreweave), an AI cloud operator that rents out Nvidia's chips, [spends more than a quarter of its revenue on debt service](https://finance.yahoo.com/markets/stocks/articles/ai-debt-exploded-4x-nearly-112437184.html) [4]. Insuring CoreWeave's debt costs roughly ten times what insuring Nvidia's does [1]. Oracle's protection has more than doubled since the start of the year [1]. *Chart: **CoreWeave's debt has almost quintupled in six quarters** Columns showing CoreWeave's total debt rising from $10.6 billion at the end of 2024 to $51.6 billion by mid-2026.* *Total debt on CoreWeave's balance sheet at each quarter end, billions of dollars, from its SEC filings; Q1 to Q3 2024 not reported. Source: CoreWeave, quarterly figures from its SEC filings, retrieved 25 October 2026. [9]* *Chart: **Default insurance prices the AI chain, from Nvidia at 101 to CoreWeave at 1,090 bps** Ranked bars of five-year credit default swap spreads: CoreWeave 1,090, Oracle 322, SpaceX 226, Meta 108, Nvidia 101 basis points.* *Five-year credit-default-swap spreads in basis points, quoted October 2026; Meta, Nvidia and SpaceX spreads are records. Source: market data via Yahoo Finance. [1]* ## Memory equity is where the credit fear surfaces The Kospi is the equity version of the same repricing. [Samsung Electronics](https://theinference.org/markets/companies/samsung) and [SK Hynix](https://theinference.org/markets/companies/sk-hynix) sell the memory that goes into the same debt-funded data centers, and memory earnings swing with chip prices; when refinancing turns expensive and builders pull back, their earnings fall first [2]. Goldman's math shows what the market now discounts: a 65% decline in semiconductor earnings in 2027, a scenario its strategists call too pessimistic [2]. The index trades at about four times forward earnings, a level no major market has touched since 2006 [2]. Hedge funds cut tech at the fastest pace in at least a decade in the five sessions through October 15, on Goldman's own prime-brokerage data, [the exit we reported on October 20](https://theinference.org/article/goldman-recorded-the-fastest-hedge-fund-tech-exit-in-its-history-then-started-selling-the-hedge) [6]. Goldman's strategists think the repricing has overshot: the cut target still implies more than 60% upside [2]. ## October 28 comes first, December settles it Every dollar of the financing gap refinances at whatever the Fed does next. As of mid-October, after September inflation of 3.7%, [futures put a hike at the October 28 meeting](https://www.cnbc.com/2026/10/14/fed-may-now-have-to-hike-twice-or-increase-by-a-half-point-in-december-traders-bet.html), three days away, at slightly better than even odds, with at least one more by year-end priced as nearly certain [7]. Goldman's economists, writing on September 30, before that inflation print, expect one hike, in December, and see "a strong chance" it is the last [8]. ## The banks that measured the hedge still finance the buildout If futures are right, the refinancing meets record protection costs, and whoever holds the paper takes the losses. No source names those holders; the protection buyers named are portfolio managers [1]. The intermediaries sit on both sides of the fork: Goldman is among the partners behind more than $500 billion of third-party capital that Nvidia has lined up [4], and Morgan Stanley, which measured the hedge, still carries the Street's highest 2027 capex forecast, $1.3 trillion [5]. October 28 delivers or defers the first hike; December settles whether it is the last [4][5]. ## Takeaway Weekly trading of default insurance on seven AI issuers passed $9 billion in September as Morgan Stanley and Goldman Sachs mapped the buildout's debts, and the Fed's October 28 vote sets the price of refinancing them. ## Sources 1. [Yahoo Finance, Why Are Investors Buying Credit Default Swaps to Hedge AI-Related Debt?, 25 October 2026](https://finance.yahoo.com/markets/options/articles/why-investors-buying-credit-default-115400301.html) 2. [Yahoo Finance, Goldman Sachs cuts Kospi target by 25% amid AI stock selloff, 25 October 2026](https://finance.yahoo.com/markets/world-indices/articles/goldman-sachs-cuts-kospi-target-092052012.html) 3. [Crypto Briefing, Morgan Stanley sees $2.9 trillion in data center spending, and a $1.5 trillion hole, 24 October 2026](https://cryptobriefing.com/morgan-stanley-data-center-capex-forecast/) 4. [Yahoo Finance (Stocktwits), AI Debt Has Exploded 4X To Nearly $500 Billion: What It Means For NVDA, ORCL And CRWV, According To IO Fund, 25 October 2026](https://finance.yahoo.com/markets/stocks/articles/ai-debt-exploded-4x-nearly-112437184.html) 5. [BizTechDaily, AI Capex Forecasts for 2027: Morgan Stanley, Goldman Sachs and JPMorgan Compared, 7 October 2026](https://biztechdaily.com/article/ai-capex-forecasts-2027-by-bank) 6. [Yahoo Finance (Investing.com), Hedge funds cut tech stocks at record pace, Goldman says, 19 October 2026](https://finance.yahoo.com/markets/stocks/articles/hedge-funds-cut-tech-stocks-174541700.html) 7. [CNBC, Fed may now have to hike twice or increase by a half point in December, traders bet, 14 October 2026](https://www.cnbc.com/2026/10/14/fed-may-now-have-to-hike-twice-or-increase-by-a-half-point-in-december-traders-bet.html) 8. [Yahoo Finance (Investing.com), Goldman pushes Fed rate hike to December after cooler inflation, 30 September 2026](https://finance.yahoo.com/economy/policy/articles/goldman-pushes-fed-rate-hike-193329752.html) 9. [CoreWeave, quarterly figures from its SEC filings, retrieved 25 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001769628) --- Morgan Stanley and Goldman Sachs count $9 billion a week of default insurance on AI debt — The Inference. 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