Barclays says a sharp slowdown in Big Tech share buybacks is unlikely to weigh significantly on the broader equity market, because investors have increasingly rewarded growth over capital returns as artificial intelligence spending accelerates. Since ChatGPT launched in late 2022, the S&P 500 Buyback Index has underperformed the broader S&P 500 by roughly 30%.
A sharp slowdown in share buybacks by major U.S. technology companies is unlikely to weigh significantly on the broader equity market, Barclays said, arguing that investors have increasingly rewarded growth over capital returns as artificial intelligence spending accelerates. Buybacks by the largest technology firms have already fallen about 17% over the past year, even as repurchases across the rest of the technology sector and the broader S&P 500 have continued to rise.
Capital moves into a multiyear AI buildout
Barclays said Big Tech companies are shifting capital allocation priorities to fund a multiyear AI infrastructure buildout, with hyperscaler capital expenditures expected to exceed $1 trillion annually by 2028. The six largest technology companies — including Apple, Microsoft, Nvidia, Alphabet, Amazon and Meta — accounted for more than a quarter of all S&P 500 buybacks in 2024 and 2025, Barclays noted.
That decline reflects growing funding needs for AI investments, with companies increasingly relying on debt issuance, equity offerings, convertible securities and operating cash flow to finance expansion. Barclays also said reduced stock-based compensation following aggressive workforce reductions may have lessened the need for buybacks.
Growth beats cash returns
Meanwhile, valuations for Big Tech have compressed from around 33 times earnings two years ago to below 25 times as investors factor in the prolonged investment cycle. Despite the pullback in buybacks, Barclays argued that the market's focus has shifted decisively toward growth.
The S&P 500 Buyback Index has underperformed the broader S&P 500 by roughly 30% since the launch of ChatGPT in late 2022. That gap suggests investors are placing greater value on companies reinvesting capital into AI-driven expansion rather than returning cash to shareholders.
Source: Investing.com
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