Boaz Weinstein’s Saba Sells Credit Default Swaps on Big Tech as AI Debt Fears Surge

November 18, 2025

Boaz Weinstein – the hedge fund manager famed for profiting from the “London Whale” scandal and dubbed the “King of Black Swans” in derivatives circles – is back at the center of market debate. This time, he’s not betting on disaster, but effectively selling insurance on some of the world’s biggest artificial intelligence (AI) winners.

According to a Reuters exclusive, Weinstein’s Saba Capital Management has been selling credit default swaps (CDS) to banks and large asset managers looking to hedge their exposure to the debt of Big Tech “hyperscalers” including Oracle, Microsoft, Meta Platforms, Amazon and Alphabet (Google’s parent). ^[1]

The move lands right as global markets wobble on fears that the AI investment boom, heavily financed with cheap debt and aggressive capital spending, could turn into a fully fledged bubble. ^[2]

What Saba Is Actually Doing: Selling, Not Buying, Protection

At first glance, “Saba sells credit derivatives on Big Tech” sounds like a bearish bet against Silicon Valley. In reality, the structure is almost the opposite.

Banks and some large asset managers are buying CDS protection from Saba on the debt of Oracle, Microsoft, Meta, Amazon and Alphabet, seeking to insure themselves against a deterioration in those companies’ credit quality. ^[3]
Saba is on the other side of the trade, selling that protection – meaning Weinstein collects premiums as long as these companies don’t default or suffer major credit events.

Credit default swaps typically rise in value when perceived default risk increases. Buyers of CDS make money (or at least protect themselves) if credit spreads blow out; sellers like Saba profit if the companies remain sound and spreads stay contained. ^[4]

What makes this notable is that, according to Reuters and multiple market summaries, this is:

The first time Saba has sold hedging protection on some of these tech giants
The first time banks have approached Saba for this specific trade on Big Tech credit exposure ^[5]

In other words, traditional lenders are newly nervous about AI-driven borrowing — and Weinstein is willing to be the one selling them insurance.

Why Banks Suddenly Want Protection on AI Hyperscalers

Behind these trades is a simple but powerful story: the AI arms race is being financed with massive bond issuance.

Recent data from the bond market show:

Meta raised around $30 billion in debt last month, a record-sized issuance aimed at funding its AI infrastructure and data center buildouts.
Oracle tapped markets for roughly $18 billion in September, also heavily linked to cloud and AI investment.
Alphabet has been issuing fresh debt as well, adding to a wave of financing by the largest U.S. tech names. ^[6]

Bank of America figures cited in the Reuters report indicate that investment-grade bond issuance by these AI-focused tech titans in September and October alone was more than double the sector’s typical annual average. ^[7]

At the same time, a Bank of America survey of global fund managers shows more than half now believe corporate investment – especially in AI infrastructure – has become excessive, with over 50% saying AI stocks are already in bubble territory and around $200 billion of U.S. corporate bonds issued this year to fund AI projects. ^[8]

For banks and credit investors sitting on large exposures to these bonds, the logic is clear:

If AI spending is overdone and the boom cools, credit markets may feel the pain before equity markets do.

Buying CDS from Saba allows them to hedge that risk.

CDS Prices: Flashing Caution, Not Panic

The CDS market is already signaling rising unease around the credit side of the AI trade – but not outright stress.

According to S&P Global data cited by Reuters: ^[9]

Oracle’s five‑year CDS spread recently climbed above 105 basis points, the highest in about two years.
CDS on Alphabet and Amazon are trading around the high‑30s in basis points.
Microsoft’s five‑year CDS sits in the mid‑30s.

These levels represent a meaningful jump in perceived credit risk compared with earlier this year, especially as CDS prices on Big Tech have more than doubled since early autumn. ^[10]

But in context, they are still well below the spreads seen in many other investment‑grade sectors. Societe Generale notes that despite the recent widening, Big Tech bond spreads remain tighter than the broader IG universe, while Citi highlights the still‑robust balance sheets and cash flows of the AI hyperscalers. ^[11]

This is what makes Saba’s stance so striking:

The market is clearly paying up for protection on Big Tech debt.
Saba believes that even after recent widening, the probability of true credit distress remains low enough that selling protection is an attractive, asymmetric bet.

The ‘King of Black Swans’ Goes Against the Grain

Chinese and Hong Kong financial media, syndicated via platforms like Futunn, have framed Weinstein’s move as “going against the grain”: at a time when much of Wall Street is fretting about an AI bubble, the man known as the “King of Black Swans” is selling rather than buying protection on the sector. ^[12]

According to these reports:

Banks are transacting with Saba to obtain CDS on Oracle, Microsoft, Meta, Amazon and Alphabet.
Some large asset managers, including at least one private credit fund, are also interested in the product. ^[13]
By selling CDS, Saba is “actively leveraging risk” – effectively betting that defaults or severe credit events in these household‑name tech firms are very unlikely. ^[14]

This positioning fits Weinstein’s long‑standing reputation as a sophisticated credit derivatives trader:

He originally gained mainstream fame for betting against JPMorgan’s ill‑fated “London Whale” trades, profiting when complex credit positions went sour. ^[15]
Saba has often been associated with tail‑risk and volatility strategies, but it also frequently steps in as a liquidity provider when others desperately want hedges.

In today’s AI‑heavy environment, he is again stepping into a crowded trade — this time by taking the other side of the rush for Big Tech credit insurance.

AI Bubble Talk Heats Up as Markets Sell Off

Weinstein’s CDS trades land in a week when AI anxiety is rippling across global markets:

The Nasdaq Composite has been underperforming, dragged lower by heavy selling in major AI‑linked stocks and suffering its sharpest monthly decline in eight months. ^[16]
Asian equities slid on Tuesday, with tech names leading the drop as investors trimmed risk ahead of Nvidia’s earnings, widely seen as a litmus test for the AI boom. ^[17]
European stocks are also under pressure, with benchmarks falling over 1% amid renewed worries about stretched tech valuations. ^[18]

On the fundamental side, high‑profile bears are adding fuel:

Michael Burry – of The Big Short fame – has accused tech giants such as Meta and Alphabet of inflating earnings by extending the depreciation life of servers and AI infrastructure, reducing reported expenses even as capital spending surges. ^[19]
Strategists like Anthony Saglimbene argue that markets are shifting from “hyping the AI concept” to demanding that AI investments prove their economic worth, given the unprecedented size of recent capex cycles. ^[20]

Add in a volatile crypto sell‑off and questions over U.S. rate‑cut timing, and the result is a global risk‑off mood in which AI‑heavy tech names are no longer untouchable growth darlings. ^[21]

“Best Short Is AI Hyperscaler Corporate Bonds”

Within credit markets, sentiment toward AI‑centric tech debt is also shifting.

In a widely watched weekly “flow show” report, Bank of America chief investment strategist Michael Hartnettrecently wrote that the “best short is AI hyperscaler corporate bonds”, highlighting the view that bond prices – not just stocks – may be too optimistic about endless AI growth. ^[22]

Deutsche Bank’s Jim Reid, commenting more broadly on tech‑related CDS, has pointed to:

A “surprise surge” in AI‑related corporate bond supply in recent weeks.
Growing use of CDS as a general hedge for AI‑linked exposures, not only against specific default risk but also against a wider correction in AI‑driven markets. ^[23]

That context explains why demand for Saba’s CDS trades is so strong:

Banks are using them to shield loan books and underwriting exposure to highly rated but heavily borrowing tech clients.
Fund managers see them as a way to hedge AI‑themed credit portfolios or even equity positions using the CDS market as a macro hedge. ^[24]

Saba, by contrast, is effectively saying: the fear is real, but the actual default risk is being overpriced.

How Much Risk Is Saba Really Taking?

On paper, selling CDS on some of the world’s most profitable companies might not look reckless:

Big Tech hyperscalers have enormous cash flows, strong margins and dominant competitive positions, limiting near‑term default risk. ^[25]
Even with record capex and borrowing, leverage ratios for firms like Microsoft and Alphabet remain low by traditional corporate standards. ^[26]

However, the tail risks that CDS sellers accept are non‑trivial:

If the AI bubble were to burst sharply, credit spreads could blow out, causing mark‑to‑market losses on sold CDS positions long before any actual default.
A combination of higher interest rates, regulatory shocks or an AI spending pullback could compress earnings, hurt valuations, and complicate refinancing plans for even top‑tier issuers. ^[27]

Weinstein’s track record suggests he is comfortable dancing along that edge, provided he believes the market has over‑priced fear relative to fundamentals.

What This Means for Investors and Policymakers

For equity and credit investors, Saba’s trades send several important signals:

AI risk is broadening from stocks to credit
- It’s no longer just about frothy valuations in Nvidia or other chipmakers. The cost and structure of AI funding – especially via corporate bonds – is now under the microscope. ^[28]
Banks are quietly de‑risking
- The willingness of banks to pay up for protection on top‑rated tech borrowers shows they are less willing to carry unhedged exposure to the AI boom on their balance sheets. ^[29]
Big Tech still enjoys a credibility premium – for now
- CDS levels and bond spreads show caution, not panic. Investors still broadly believe the hyperscalers can grow into their debt loads, but they’re no longer pricing that outcome as a sure thing. ^[30]
Policy debate over AI investment may intensify
- With surveys flagging over‑investment in AI as a top macro risk, regulators and central bankers may start paying closer attention to how AI capex is being financed and whether it could amplify future downturns. ^[31]

Key Facts as of November 18, 2025

Who: Boaz Weinstein’s Saba Capital Management
What: Selling credit default swaps on Oracle, Microsoft, Meta, Amazon and Alphabet to banks and asset managers seeking protection against rising AI‑linked debt risks. ^[32]
Why: AI infrastructure spending has driven a surge in corporate bond issuance, pushing CDS prices on Big Tech to multi‑year highs and prompting lenders to hedge. ^[33]
Market backdrop:
- Global tech and AI stocks are under pressure, with the Nasdaq lagging and Asian and European markets sliding on valuation concerns. ^[34]
- Fund managers increasingly see AI as a bubble risk, with AI‑related corporate bond issuance topping $200 billion this year. ^[35]
Signal: Saba’s trades suggest that while the market is waking up to AI‑related credit risk, at least one high‑profile derivatives fund believes the probability of actual Big Tech defaults remains low enough to make selling protection attractive.

How this call plays out will depend on whether AI’s debt‑fuelled rocket ship continues its ascent in 2026 – or whether today’s hedging frenzy proves to be an early warning before the AI bubble finally bursts.

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