AI Investors Scramble for Downside Protection as Tech Valuation Concerns Mount

Investors and technology executives are increasingly seeking protection against a potential artificial intelligence market downturn as concerns mount over the sustainability of trillions of dollars in AI-related investments, The Wall Street Journal reported Saturday.

Demand for hedging instruments, including put options and credit-default swaps, has accelerated following sharp declines in technology stocks and growing anxiety about the financial risks tied to massive AI infrastructure spending.

The Nasdaq Composite fell 2.9% Friday, recording its worst monthly performance since March 2025, as investors reassessed valuations across the technology sector.

CoreWeave, a major AI infrastructure provider, has attracted particularly strong demand for downside protection. Trading volumes for put options tied to the company reached record levels in October, according to Cboe Global Markets data.

Popular contracts include options expiring in 2028 that would profit if CoreWeave shares fall to $35, compared with approximately $55 recently.

Concerns have also spread to corporate debt markets. The cost of insuring against defaults by Amazon, Alphabet, Microsoft, Meta, and Oracle recently climbed to its highest level since 2021, according to bond data provider Solve.

Oracle experienced particularly sharp deterioration, with its credit-default swap spreads widening by more than one percentage point.

Trading firms are developing new financial products to address risks associated with AI computing infrastructure. Jump Trading has launched a computing-power trading desk offering derivatives designed to protect data center operators against falling chip rental prices.

Rental rates for Nvidia B300 chips have increased approximately 56% this year to $7.56 per hour, according to Silicon Data. The contracts could shield operators against a future decline in rental rates as computing capacity expands.

Susquehanna International Group is also fielding interest from data centers and private AI infrastructure providers seeking protection against semiconductor-related risks. Some proposed contracts would track computing-power indexes, potentially helping operators secure financing by limiting exposure to falling rental revenues.

Despite growing hedging activity, demand for protection remains relatively small compared with the broader AI investment boom.

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