Tech’s record-breaking buybacks matter for investors — here’s why

S&P 500




Dow 30








Russell 2000




Crude Oil
















10-Yr Bond
















CMC Crypto 200




FTSE 100




Nikkei 225




Big Tech’s been doing big buybacks.

Sure, this has been the case for years, but we’re seeing companies like Apple (AAPL), Alphabet (GOOG, GOOGL), Amazon (AMZN), and Nvidia (NVDA) doubling down on buybacks, which are when a company buys its own stock, reducing the overall share count. These types of share re-purchases are controversial, because they often are positively reflected in earnings per share (EPS) and, consequently, in the value of the company’s stock.

Critics fear that buybacks, which are often debt-financed, contribute to financial fragility across the markets, though some studies have suggested the system-wide effects of buybacks are finite. Meanwhile, proponents will say that buybacks are a way of re-investing in their companies, putting extra cash to work. Even President Biden has taken notice, levying a new tax on buybacks just this year. Though there’s limited agreement about what the long-term effects of buybacks are, how they affect the economy in the aggregate, and what’s to be done, two things are clear.

First, buybacks are at this point incredibly common. In 2021, S&P 500 companies bought back $882 billion of stock, breaking records.

Second, Big Tech is a huge fan of buybacks. Tech companies account for approximately 35% of quarterly buyback spending, the largest share of any sector, according to investment research management firm VerityData.

For the second quarter of this year, here’s what we’re talking about. Below, for Q2, you’ll see Nvidia’s $3.1 billion buyback, which was its largest on record, as was also the case for Amazon’s $3.3 billion buyback.

Meta’s buyback in Q2 clocked in at $5.1 billion — a comparatively small number when contextualized by the previous four quarters of $7.1 billion, $14.4 billion, $19.2 billion, and $9.4 billion.

Then, of course, there’s Apple, which clocked the largest buyback of any company in any sector in Q2 2022 and consistently makes share repurchases around $21 billion.

“Apple has spent more on buybacks than any U.S. company — likely any company in the world — during our record period, from 2004 to present,” said VerityData Director of Research Ben Silverman.

This content is not available due to your privacy preferences.

Update your settings here to see it.

Investors tend to like buybacks on the face of it, as they are seen as boosting EPS and improving shareholder value.

However, as tech companies keep buying back shares at a rapid clip, investors need to remember that not all buybacks are created equal, said Silverman. These sorts of share repurchases can absolutely facilitate stability and long-term growth in a stock — if they’re part of a long-term capital expenditures plan. Opportunistic buybacks in response to stock volatility, on the other hand, not only can look bad but often aren’t enough to stop the bleeding while pointing to deep problems within the company.

“Buybacks aren’t enough to prop up the market or even an individual stock,” said Silverman. “But [this week’s market volatility] is an example of buying opportunity for companies if management truly believes their company’s stock is intrinsically undervalued.”

So, what should investors watch for, and what do we know about who’s doing it correctly?

First, candor on the part of management is key, said Silverman. Investors should watch for how, and if, management is talking about buybacks at all in earnings calls and public appearances. Apple, for example, is direct about its buybacks at its highest levels, and has consistently made the same share re-purchases over and over. However, if a company is buying back its shares quietly, that’s when you should be most skeptical.

“If management isn’t talking about buybacks on earnings calls or at investor conferences that’s a potential sign that they don’t consider buybacks an important component of their capital allocation strategy,” said Silverman, who’s studied buybacks for almost two decades.

It’s also not the announcement that matters, but the execution.

“Buyback authorization announcements generate a lot of headlines that lead to near-term bumps for stocks but retail investors should focus on the actual buyback execution,” he said.

The logos of tech giants Amazon, Apple, Facebook, and Google. REUTERS/File Photos.

To say whether Big Tech’s buybacks are smart — that is, whether they serve a company’s long-term prospects — we need to look at them on a case-by-case basis. There are some famously bad cases within tech from the last 20 years. For example, Silverman described legacy tech giant IBM (IBM) as the “poster child of bad buybacks.”

“The company’s overall strategy was intimately tied to buybacks in the wake of the Great Recession and it proved a disastrous use of cash over the next several years, providing shareholders with a negative return,” he said.

IBM shares were at their all-time highest in 2012 and 2013, and have declined steadily ever since.

Meanwhile, there are companies like Nvidia, which bought back its own stock consistently for almost a decade and a half, between 2004 and 2018. The results speak for themselves in Nvidia’s case. In that time, the company’s stock rose 60X, proving out management’s mid-2000s assertions that its stock was deeply undervalued.

On Jan. 1, 2004, Nvidia was trading at $1.85 a share. By Jan. 1, 2018, the stock was trading at $61.45 a pop. On Friday, Nvidia shares opened at $127.42.

Then, of course, there are those cases where the jury’s still out. For instance, Facebook-owner Meta Platforms (META) bought back $44.8 billion in shares at $330.55 in 2021. Since, the company’s shares have been beaten down considerably and opened Friday at $148.05 a share. The company’s “aggressive” posture when it comes to buybacks “deserves scrutiny,” said Silverman.

Allie Garfinkle is senior tech reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.

Read the latest financial and business news from Yahoo Finance.

Download the Yahoo Finance app for Apple or Android.

Follow Yahoo Finance on Twitter, Facebook, Instagram, LinkedIn, and YouTube.



New iPhones have Qualcomm satellite modem, new Apple radio chips

Apple Inc’s iPhone 14 models contain a Qualcomm Inc chip that can talk to satellites, but have additional custom-designed Apple components used in the phone’s biggest new feature, according to an analysis of the phone by iFixit and an Apple statement. Apple released its iPhone 14 lineup on Friday. Apple said earlier this month that the iPhone 14 models contain new hardware that makes possible the emergency message service, which Apple plans to turn on with a software update coming in November.


Tycoon Running a Quarter of China’s Copper Trade Is on the Ropes

(Bloomberg) — From a start guarding trains full of metal from thieves on freezing winter nights, He Jinbi built a copper trading house so powerful that it handles one of every four tons imported into China.Most Read from BloombergBezos Loses Spot as World’s Second-Richest Person to AdaniTurkey Seeks to Be First NATO Member to Join China-Led SCOUkraine Latest: Biden Warns Putin; Nuclear Plant Gets Grid PowerPutin Threatens New Military Strikes on Ukraine InfrastructureThere’s an Unusual Thing Ha

Motley Fool

3 Stocks You Can Keep Forever

Essentially, it’s having a killer business model that doesn’t need to change much to stay profitable, relevant, and rewarding for shareholders as the years roll by. With that thought in mind, let’s examine a trio of stocks worth buying and holding forever — and you’ve probably already heard of all three. Abbott Laboratories (NYSE: ABT) is a no-brainer stock for indefinite holding because it’s always growing its dividend and making share repurchases to boost returns.

Motley Fool

3 Once-In-a-Generation Buying Opportunities In the Nasdaq Bear Market

Things have been even worse for the tech-centric Nasdaq Composite (NASDAQINDEX: ^IXIC), which has lost as much as 34% of its value on a peak-to-trough basis since hitting its closing high in November. The magnitude of the Nasdaq’s decline has kept the widely followed index firmly entrenched in a bear market. The first buying opportunity you may never see again is the chance to load up on shares of semiconductor giant Intel (NASDAQ: INTC) below $30.

Motley Fool

Got $5,000? Buy and Hold These 3 Value Stocks for Years

Growth stocks tend to be exciting: The companies behind them are typically expanding their revenues at a relatively rapid clip, with the stock shares following suit. Here are three stocks that seem meaningfully undervalued, and each of them could be considered a growth stock, as well. Meta Platforms (NASDAQ: META) is the company you might know as Facebook, but it changed its name in 2021 to reflect the scope of its operations and ambitions beyond its original social media platform.


2 Defensive Stocks That Can Weather the Market Volatility

We’re caught up in something of a market storm these days, faced with downward trends and high volatility. It’s time for investors to start taking defensive postures with their portfolio additions. The classic defensive plays, of course, are the dividend stocks – but there are other protective plays to make. Investors can narrow their focus to stocks with strong product lines in essential industries, where demand will remain viable even if the economy tips into recession. These companies, while


Hot core: Canada may need a recession to cool down inflation

The underlying pressures driving inflation in Canada are likely to peak in the fourth quarter of this year, economists told Reuters, though most see signs fast rising prices are becoming entrenched and warn a recession may be needed to avoid a spiral. Canada’s inflation data for August will be released on Tuesday, with analysts forecasting the headline rate will edge down to 7.3%, from 7.6% in July and a four-decade high of 8.1% in June. But all eyes will be on the three core measures of inflation – CPI Common, CPI Median and CPI Trim – which taken together are seen as a better indicator of underlying price pressures.


Top Pharmaceutical Stocks for Q4 2022

These are the pharmaceutical stocks with the best value, fastest growth, and most momentum for Q4 2022.

Leave A Reply

Your email address will not be published.