The P/E ratios have contracted and the CDS spreads have widened in all three cases, but Nvidia appears unscathed

Nvidia's stock has held up recently despite a widening CDS spread.

Credit-default swap spreads have widened across several major AI companies, but stock prices have reacted differently. Nvidia's shares have held up, while Broadcom and Oracle's have fallen sharply.

Usually, when investors see CDS spreads widen, they assume the market is pricing in more credit risk. It is hard to imagine Nvidia's five-year CDS reflecting much credit risk, given how much revenue and earnings have grown in recent years and the stock's resilience, but that is exactly what's been happening.

It isn't just Nvidia (NVDA). The same is happening at AMD (AMD) and Broadcom (AVGO). The trend extends to the so-called hyperscalers. For example, Oracle's and Meta's five-year CDS spreads have widened as well, even though Meta's stock (META) sits just below its all-time high, while Oracle's stock (ORCL) has fallen sharply.

CDS spreads for Nvidia (in blue), AMD (in purple), Broadcom (in white), Meta Platforms (in yellow) and Oracle (in teal) from December 2025 to October 2026.

Increasing credit risk

It is reasonable to think the market may be worried about companies like Oracle and Meta, given their surging capital expenditures in recent quarters and the potential pressure on free cash flow as spending shifts from the hyperscalers to the semiconductor companies. But it also seems reasonable that if credit risk at the hyperscalers is climbing because of increased spending and shrinking free cash flow, the suppliers could be at risk too, given the chance that the hyperscalers may cut back at some point.

More interesting than why the spreads are widening is the disconnect between the stocks' performance and the credit market's assessment. One would expect a stock facing rising credit risk to see its valuation reset. To some extent, that has happened. From June 2 through Oct. 8, Nvidia's price-to-earnings ratio based on next-12-month estimates fell from about 21 to around 16, while its CDS spread widened from about 40 to 84 basis points. Yet the stock has held up.

Nvidia's trading price, price/EPS mean estimate (in yellow) and CDS bid spread (in white) from December 2025 to October 2026.

Broadcom's P/E ratio has fallen from 30 on June 2 to 18.7 as of Oct. 8, while its CDS has more than tripled, rising from 41 to about 132 basis points. The stock hasn't performed well over that stretch, dropping about 25%.

Broadcom's CDS bid spread (in white) and stock price/EPS (in yellow) from December 2025 to November 2026.

Oracle, by contrast, has seen its stock drop more than 40% since June 2, while its P/E ratio contracted to 14.5 from nearly 30 and its CDS widened to 252 basis points from roughly 151 basis points. It seems odd that Oracle and Broadcom have seen their stocks plunge while Nvidia's has held up. In all three cases, the P/E ratio contracted, and the CDS spread widened, but Nvidia appears unscathed.

Oracle's trading price/EPS (in yellow) and CDS bid spread (in white) from January to October 2026.

Earnings estimates provide support

The main difference is that Nvidia's earnings estimates for the next 12 months have risen from $10.48 to $14.18 per share, an increase of more than 30%, while Broadcom's have risen from $15.83 to $19.23, just over 20%, and Oracle's from $8.24 to $9.36, about 14%. The figure shows what analysts forecast the companies to earn over the coming year on a rolling basis; when earnings rise while the stock price falls or stays flat, the P/E ratio shrinks.

Earnings per share from March to October, with Broadcom (green line) having the highest EPS at 19.23, Nvidia (blue line) at 14.18, and Oracle (light blue line) at 9.36.

It seems Nvidia's shares have held up because the increase in its forward earnings estimate has more than offset the decline in its P/E ratio. However, even though Broadcom and Oracle have also seen their earnings estimates rise, those increases haven't been enough to offset their sharper multiple contractions. Oracle, the stock with the smallest increase in forward estimates, is down the most, while Nvidia, with the largest increase, is up, with Broadcom in the middle.

That means two things. If the credit worries fade, the market could let these P/E ratios expand again. And if forward earnings estimates weaken instead, these stocks could face further pressure.

Michael Kramer is the founder of Mott Capital Management and a long-only investor focused on macroeconomic themes. He analyzes long-term macro trends and short-term market risk using technical analysis, fundamentals and options-market positioning. See here for further disclosures.

-Michael Kramer