AI investors hedge against potential tech downturn as Wall Street warns on AI spending

Investors and tech executives are increasingly hedging against a potential downturn in the artificial intelligence market amid growing concerns over the sustainability of trillions of dollars in AI-related investments, according to The Wall Street Journal. Demand for hedging tools like put options and credit-default swaps has accelerated following sharp declines in tech stocks. The Nasdaq Composite fell 2.9% on Friday, marking its worst monthly performance since March 2025, as investors reassessed tech valuations. CoreWeave, a major AI infrastructure provider, saw record trading volume for put options in October, with popular contracts betting on its shares falling to $35 from around $55. The cost of insuring against defaults by Amazon, Alphabet, Microsoft, Meta, and Oracle rose to its highest level since 2021. Trading firms are developing new financial products to address AI infrastructure risks, including derivatives to protect data center operators against falling chip rental prices. Nvidia B300 chip rental rates have risen about 56% this year to $7.56 per hour, and contracts could hedge against future declines as computing capacity expands. Despite growing hedging activity, demand for protection remains relatively small compared to the broader AI investment boom.