Intel’s cash warning puts a new price on protecting its debt
NEW YORK — The cost of protecting Intel’s debt against default reached a record on 30 October after the chipmaker told investors it no longer expected positive cash flow this year. The annual price of five-year protection rose to nearly 1.25% of the debt covered. Amazon added to concerns across the technology sector when it reported a large cash outflow and signalled that capital spending would rise again in 2027. investing.com
What the move costs a bondholder
An investor can buy a credit default swap to cover losses if a borrower fails to pay. Intel’s five-year swap rose 17.5 basis points to 124.75 basis points, according to Markit data reported by Reuters. On $10 million of debt, that is equivalent to an annual protection cost of about $124,750, up $17,500 in a day. The premium is what investors pay to transfer the risk. Intel’s interest payments on its existing bonds do not change when the swap price moves.
Intel faced a particular problem alongside the wider concern over artificial intelligence spending. Demand for personal computers had weakened, and its quarterly revenue forecast came in more than $1 billion below market expectations. At the same time, demand for memory from AI infrastructure was driving up component costs across the consumer electronics industry.
Record cash generation leaves less for shareholders
The pressure extends to companies generating more cash than ever. Microsoft, Alphabet, Amazon, Meta and Oracle together returned 9.3% of the cash their businesses generated to shareholders through dividends and share buybacks in the first nine months of 2026. A year earlier they returned 27.4%. The latest share was the lowest in at least 15 years, according to a Reuters analysis of company filings and LSEG data.
Oracle recorded one of October’s more pronounced moves in the credit market. The cost of protecting its debt rose by more than a full percentage point over the month, according to Solve data reported by The Wall Street Journal. For a company financing data centres, construction bills and interest payments can fall due well before customers generate enough revenue to cover them. That timing helps explain why creditors are demanding more protection even as the largest technology companies continue to generate record cash.
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