Wall Street is increasing its exposure to financial protection as concerns grow over a possible reversal in the artificial intelligence market. Although many investors remain optimistic about the sector, demand is rising for instruments designed to reduce losses if AI-related stocks, infrastructure or computing prices fall.
The movement is visible across several areas of the market. Investors are purchasing put options, which grant the right to sell shares at a predetermined price, as well as credit-default swaps, contracts that provide protection against a company failing to repay its debt. Companies that build and operate data centers are also exploring hedges against a decline in demand for computing capacity.
“We are seeing really significant demand from people who want to protect against losses,” Stephen Solaka, senior vice president at Gateway Investment Advisers, told The Wall Street Journal.
The concern intensified after companies of different sizes failed to meet market expectations. Volatility has also affected chipmakers, major technology companies and operators of computing infrastructure that had benefited from enthusiasm for AI. On Friday, October 30, the Nasdaq fell 2.9%, recording its worst month since March 2025. Alphabet and Intel also posted some of their sharpest daily declines.
Put options have attracted particular attention around CoreWeave, an AI infrastructure company that rents computing capacity and has relied on substantial financing. Data from Cboe Global Markets showed that trading in options linked to the company reached a record in October and remained elevated. Among the most popular positions were options expiring in 2028 that would pay off if CoreWeave shares fell to $35. The stock had been trading at around $55 the previous week.
Another form of protection involves credit-default swaps. The cost of these contracts rose last month for five large technology and cloud-computing companies: Amazon, Alphabet, Microsoft, Meta and Oracle. According to data from provider Solve, the levels reached their highest point since 2021.
“There were no exceptions, suggesting broad market concern about the sector rather than company-specific credit events,” said Eugene Grinberg, Solve’s co-founder. The change was especially notable at Oracle, where credit-default swap spreads increased by more than one percentage point.
The hedging activity also extends to companies that rent chips and infrastructure for AI development. These businesses are looking for ways to reduce the risks associated with falling prices for computing capacity. Jump Trading recently created a desk focused on the computing-power market, using price differences between suppliers and structuring financial contracts directly between counterparties.
In one possible arrangement, an infrastructure company renting Nvidia chips could buy a put option against a decline in rental prices. If demand for processing fell, the resulting drop in rental income could be partly offset by the contract, which would allow the company to sell its computing capacity at a previously agreed price.
The rental market has already experienced significant price changes. The hourly price of Nvidia B300 chips rose about 56% this year to $7.56, according to an index from Silicon Data. In a hypothetical transaction, Jump could agree to purchase that capacity if the price fell to $4 per hour.
Jump president Dave Olsen said market participants are examining more closely which companies are likely to succeed and which could face difficulties. Their analysis includes the economic models of these businesses and their ability to meet financial obligations.
Susquehanna International Group has also received inquiries from data centers and private AI infrastructure companies interested in protecting their exposure to semiconductor prices. One possibility involves contracts tied to computing-capacity price indexes. If prices decline because demand weakens or supply increases, the instruments could generate payments to offset losses elsewhere in the business.
Nick Volbi, who oversees institutional prediction markets at Susquehanna, said this type of protection could also help companies negotiate loans with banks. By presenting lenders with insurance against a fall in computing-capacity prices, companies may seek more favorable financing terms.
The report also described interest in prediction markets related to possible restrictions on data-center construction in the United States. Kalshi offers contracts on which states could suspend new projects before 2028, including New Hampshire, Michigan and Maine. Trading in this segment remains limited.
Despite the increase in demand for hedging, these strategies remain small compared with the overall volume of AI investment and speculation. For many market participants, the sector still has substantial growth potential. Olsen compared the approach to buying home insurance: investors do not need to expect a disaster to want protection against one.
Sources: Olhar Digital.