While many investors have been scared away from tech giants at the center of this year’s equity rout, the companies are likely to continue plowing money into buybacks that will offer at least one source of continuing support for the stocks.
The big tech firms could be tempted to hold onto their cash to guard against the economic turmoil created by President Donald Trump’s tariff policies. However, buybacks remain attractive because companies like Microsoft Corp., Amazon.com Inc. and Apple Inc. are sitting on piles of cash worth north of $500 billion.
“My sense is we’re going to see probably little to no slowdown in buybacks, said Robert Schiffman, a senior credit analyst at Bloomberg Intelligence. “You don’t need to hoard cash if you have $30, $50, $100 billion in cash on your books.”
The first signals of the trajectory should come from Alphabet Inc.’s earnings announcement on Thursday. Apple, which is the biggest buyer of its own shares, reports on May 1. Both companies typically use the first quarter earnings season to report new buyback authorizations and other capital return plans. A year ago, Alphabet authorized the repurchase of $70 billion in shares and initiated a dividend, while Apple earmarked $110 billion for buybacks.
The threats from tariffs — to economic growth and profits — have driven investors out of the technology stocks that led US markets higher for most of the past two years. The tech-heavy Nasdaq 100 Stock Index is down about 18% from a record high just two months ago and the biggest names have fallen even more. Apple has dropped 23% from a December peak while Alphabet is off 27% from a February record high.
In the face of such uncertainty, buybacks can be a show of financial strength. Two weeks ago, Broadcom Inc. reported a $10 billion buyback plan — the first since 2022. Chief Executive Officer Hock Tan said it reflected the board’s confidence in the strength of the chipmaker’s businesses.
“As an investor, it’s always about risk-reward and if you have a business trying to help you see where relative value is, it maybe gives them confidence that there’s a natural buyer at those levels or lower,” said Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services. “That by itself can be positive.”
The capital returns of tech giants have long been a source of attraction for investors and a display of their immense profitability. Buybacks in particular are seen as an efficient way to return cash to shareholders by reducing the number of shares outstanding, which boosts earnings per share.
Despite many Big Tech companies spending heavily to beef up artificial intelligence computing capacity, the group is still generating plenty of cash.
Combined free cash flow for the six biggest technology companies — Apple, Microsoft, Nvidia Corp., Alphabet, Amazon.com and Meta Platforms Inc. — is expected to be nearly $100 billion in the first three months of 2025, according to analyst estimates compiled by Bloomberg.
“Big Tech balance sheets have never been stronger,” said Schiffman. “If you don’t have anything else to spend it on, sitting on cash doesn’t make a lot of sense.”
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