Apollo Global Management Warns of Rising Hyperscaler Debt Risk

Chief economist Torsten Slok of Apollo Global Management warned Wednesday that corporate debt issued by hyperscale cloud computing providers is increasing in risk. Slok noted that credit default swaps for these companies have become more expensive, with the gap between hyperscaler and bank credit default swaps widening to approximately 60 basis points since October 2025.

Slok attributes this trend to a debt-financed AI capital expenditure cycle marked by rising leverage, negative free cash flow, and uncertain returns on depreciating assets. While some technology investors argue that increasing margins justify the debt, other analysts suggest a different outlook.

Dean Baker noted that sophisticated investors appear to believe there is a substantial risk that AI companies cannot meet their financial commitments. This financial pressure arrives as leaders of large language models call for a slowdown in product advancements due to safety concerns, a move that could further impact the cloud providers hosting these models.