Barclays said a pronounced slowdown in stock buybacks by the largest U.S. technology companies is unlikely to have a major negative effect on the broader equity market, noting that investors have increasingly prioritized growth as AI-related spending accelerates.
The bank highlighted a reorientation of capital allocation within Big Tech toward funding a multiyear buildout of AI infrastructure. Barclays cited expectations that hyperscaler capital expenditures will top $1 trillion annually by 2028 - a development it sees as central to the shift away from returning cash to shareholders.
According to Barclays, buybacks among the largest technology firms have fallen roughly 17% over the past year. That decline contrasts with continued increases in repurchases across the rest of the technology sector and the broader S&P 500.
Barclays also noted the outsized role the biggest technology companies play in overall buyback activity. The six largest firms - Apple, Microsoft, Nvidia, Alphabet, Amazon and Meta - represented more than a quarter of S&P 500 buybacks in 2024 and 2025, underscoring how shifts in their capital allocation can materially affect aggregate repurchase totals.
Firms are meeting increased funding needs for AI work through a mix of financing options, Barclays said. Those options include issuing debt, raising equity, using convertible securities and drawing on operating cash flow. The brokerage further observed that lower stock-based compensation following aggressive workforce reductions may have reduced some companies' need to repurchase shares.
Valuations for the largest technology businesses have also compressed as investors price in the extended investment cycle. Barclays reported that multiples have moved down from around 33 times earnings two years ago to below 25 times earnings more recently.
Barclays pointed to a broader market signal consistent with the shift toward growth: since the late-2022 arrival of ChatGPT, the S&P 500 Buyback Index has underperformed the broader S&P 500 by roughly 30%. The brokerage interprets that gap as evidence investors are valuing companies that reinvest capital into AI-driven expansion more highly than those that emphasize cash returns.
Overall, Barclays concluded that the pullback in buybacks among the largest tech firms reflects changed priorities tied to AI investment, and that this reallocation of capital is unlikely to significantly weigh on the broader equity market.
Summary
Barclays finds the largest U.S. technology companies have cut buybacks as they redirect capital toward AI infrastructure projects, with hyperscaler spending expected to exceed $1 trillion annually by 2028. This reallocation has reduced repurchases among the biggest firms by about 17% over the past year, even as buybacks elsewhere have risen. Barclays says investors are rewarding growth and that the slowdown in repurchases is unlikely to materially hurt the broader market.
Key points
- Big Tech is shifting capital from buybacks to fund a multiyear AI infrastructure buildout; hyperscaler capex is expected to exceed $1 trillion annually by 2028.
- The six largest tech firms accounted for more than 25% of S&P 500 buybacks in 2024 and 2025; buybacks at the largest firms fell about 17% year-over-year.
- The S&P 500 Buyback Index has lagged the broader S&P 500 by roughly 30% since late 2022, reflecting investor preference for reinvestment into AI-driven growth.
Risks and uncertainties
- Increased funding needs for AI investments may raise reliance on debt and equity issuance, affecting corporate financing dynamics - primarily impacting the technology sector and capital markets.
- Compressed valuations for major tech firms as investment cycles lengthen could influence investor sentiment and sector performance - affecting technology and broader equity indices.
- Changes in stock-based compensation and workforce levels may alter the operational drivers for buybacks, introducing uncertainty in repurchase trends - impacting corporate governance and shareholder return policies.