AI investors hedge against potential tech sector collapse

Investors and tech executives are increasingly hedging against a potential AI market downturn amid growing concerns over the viability of trillions in sector investments, the Wall Street Journal reported Saturday. Demand for protective instruments like put options and credit-default swaps has accelerated following sharp tech stock declines. The Nasdaq Composite fell 2.9% Friday, its worst monthly performance since March 2025, with AI infrastructure provider CoreWeave seeing record put option volumes in October. Hedging has spread to corporate debt markets, with default insurance costs for Amazon, Alphabet, Microsoft, Meta, and Oracle hitting their highest levels since 2021. Trading firms are developing new derivatives to protect data center operators against falling chip rental prices, though overall hedging demand remains modest relative to the AI investment boom.