Big Tech reining in stake buybacks to fund AI race

TOTAL FREE CASH FLOW FOR TECH MAJORS IS PROJECTED TO FALL 64%

- JERAN WITTENSTEIN

AFTER YEARS OF funnelling cash to investors through stock buybacks, big technology companies are reining in that spending as they race to sink more money into artificial intelligence (AI).

Last quarter, Alphabet, Microsoft, Amazon.com and Meta Platforms spent the least on combined share repurchases than in any quarter since 2019, according to data compiled by Bloomberg. Alphabet and Microsoft spent roughly $11 billion on buybacks, while Amazon and Meta held off entirely. Amazon hasn’t bought back stock since 2022.

“There’s certainly a setup for an extended period of reduced share buybacks,” said Robert Schiffman, senior credit analyst at Bloomberg Intelligence. “I don’t think it’s because of a lack of financial flexibility, it’s just what are the best uses of capital.”

The shift from returning cash to shareholders to spending it on AI comes as investors grow increasingly skeptical about whether and when Big Tech’s relentless outlays will deliver the promised payoffs.

Microsoft shares have plunged 17% and Amazon.com has lost 8% in the wake of earnings reports that revealed higher-than-anticipated spending and not enough anticipated revenue growth to justify it.