Why are credit default swaps unnerving AI investors?

The cost of insuring against the risk of potential US tech defaults has hit record levels in the latest sign of credit stress building in the so-called AI trade, especially for data centres dependent on future revenue.

Although shares in companies driving the AI boom are still among the biggest gainers on global equity markets this year, many have fallen sharply in the past few weeks, as investors reassess the cost of capital against a backdrop of rising interest rates and inflation.