AI startups: JP Morgan sounds the alarm, CDS explode on debt

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The warning comes from Justin Biemann, global investment strategist at J.P. Morgan Private Bank. In a note published on October 23, 2026, he states that “the AI ​​label alone is no longer enough to reassure lenders”. Companies must now demonstrate that they can “finance their investments, honor their debt and ultimately transform their expenses into cash flow”.

This message joins that launched a few days earlier by Elon Musk. The boss of SpaceX explained on October 25 that debt markets had “almost entirely cut off access to financing” for companies whose revenues depend solely on AI data centers. A strong signal for a sector used to raising billions without justifying immediate profitability.

The tension is particularly visible in the market for credit default swaps (CDS), these products which provide insurance against payment default. Weekly CDS trading volume tied to bonds from Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia exceeded $9 billion on average in September, up from less than $2 billion per week in July, according to Morgan Stanley.

Without naming it, Biemann cites a funding-dependent AI infrastructure company that has accumulated “tens of billions of dollars in debt and other liabilities.” Its five-year CDS jumped to 1,100 basis points. In other words, insuring $10 million of your debt now costs more than $1 million per year. “These levels imply a probability of default near or above 50% over five years, compared to less than 30% a year ago,” writes the strategist.

For well-capitalized giants, the bill remains more measured. AI leaders with strong cash flow pay between 50 and 120 basis points for five years of protection, a level that feels more like portfolio hedging than betting on a crisis.

JP Morgan emphasizes that the tensions particularly affect a certain type of company: those whose model is largely based on credit. They must continue to borrow to finance exploding expenses, while the income supposed to reimburse them is still slow to arrive. But the bank does not rule out a deeper slowdown in AI spreading to other risky assets, including Bitcoin.

The link is not anecdotal. Bitcoin and Nvidia bottomed out within a few weeks of each other at the end of 2022, just after the launch of ChatGPT, before going on a spectacular rally. Since October 6, 2026, the Nasdaq has fallen 6.7% to around 29,263 points, and AI-related stocks like Nvidia and Oracle have suffered more than the index. On the crypto side, Bitcoin is trading around $79,597, down 5.9% over thirty days.

Biemann finally recalls that Lehman Brothers' CDS had gone from less than 100 basis points in the third quarter of 2007 to more than 1,400 in mid-September 2008, a few days before the bankruptcy. Without announcing an equivalent scenario, he invites investors to consider current CDS “as warning lights rather than countdowns”.

Machine-translated from French