Big Tech companies are significantly reducing stock buybacks to fund an aggressive investment in artificial intelligence. Last quarter, Alphabet, Microsoft, Amazon, and Meta Platforms collectively spent the least on share repurchases since 2019, with Amazon completely halting buybacks since Q2 2022 and Meta's buybacks plunging to one-tenth of previous levels. Alphabet alone reduced its repurchases by $16.3 billion last year, and Oracle's annual buyback volume decreased by over 93% from $21.6 billion to $1.5 billion.
This strategic shift marks a departure from years of returning cash to shareholders, indicating a new paradigm where AI development capability and monetization potential are prioritized. According to RBC, capital expenditure for eight major tech giants is projected to jump from $427 billion last year to $562 billion this year, while Goldman Sachs forecasts AI infrastructure investment will easily exceed $500 billion this year. Amazon, for example, has proposed $200 billion in capital expenditure this year, surpassing competitors.
Analysts like Robert Schiffman of Bloomberg Intelligence see a setup for an extended period of reduced buybacks, driven not by a lack of financial flexibility but by a re-evaluation of the best uses of capital. Wells Fargo strategist Ohsung Kwon notes that AI development and monetization are now considered more vital than shareholder returns. The increased spending on AI is expected to significantly impact companies' free cash flow, with the combined free cash flow for Alphabet, Microsoft, Meta, and Amazon projected to fall 64% over the next four quarters, from roughly $270 billion in 2025 to about $96 billion.
