(Bloomberg/Jeran Wittenstein) — 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.”
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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 15% from a record high just two months ago and the biggest names have fallen even more. Apple has dropped 20% from a December peak while Alphabet is off 24% 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.”
Top Tech News
Intel Corp. is poised to announce plans this week to cut more than 20% of its staff, aiming to eliminate bureaucracy at the struggling chipmaker, according to a person with knowledge of the matter. Xiaomi Corp. pushed back the debut of its first sport utility vehicle following a fatal accident involving its marquee electric car, a blow to its ambitions to put pressure on Tesla Inc. and BYD Co. Apple Inc.’s new Siri engineering chief is overhauling the management team leading development of the beleaguered voice assistant, taking a step he assured employees would set the company up for success. Bearish bets on shares of SK Hynix Inc. surged to an all-time high this month, as South Korea ended its ban on short-selling at perhaps the worst possible time for the memory chipmaker. OpenAI’s goals of building a “super assistant” app and reaching general artificial intelligence won’t succeed without search technology but Google has declined to work with the startup, the head of its ChatGPT product testified Tuesday in the Google antitrust trial.Earnings Due Wednesday
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–With assistance from Tom Contiliano and Subrat Patnaik.
(Updates share performance in fifth paragraph.)
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