💸 The Return of Share Buybacks in Tech

Quote of the week: “ Every small bit helps if repurchases are made at value-accretive prices. Just as surely, when a company overpays for repurchases, the continuing shareholders lose” Warren Buffett

Some of the biggest names in tech are restarting their buyback programs.

The top 20 S&P 500 companies now account for more than half of all share repurchases in Q2 2025 , marking one of the most concentrated waves of buyback activity in years.

This resurgence reflects a shift from splashy capital spending toward rewarding shareholders directly, even as valuations remain somewhat elevated and regulatory scrutiny builds.

By the end of this piece, you’ll see:

1. What’s really driving this new buyback cycle ,
2. Which companies are using it to create genuine value , and
3. When repurchases are smart capital allocation or financial sleight of hand .

What’s Happened in Markets this Week

Here’s a quick summary of what’s been going on:

🏛️ US government opens back up, but deep political divisions remain ( Reuters )

• After 43 days, the US government is back in action, but only until January 30, so the clock’s already ticking toward a potential encore shutdown.
• Economic data blackouts and delayed federal spending dented Q4 GDP by 1.5 points, with $14 billion of it gone for good.
• We should expect more volatility as political infighting remains unresolved, health subsidy votes are unguaranteed, and Trump’s civil service cuts could still re-emerge.
• Consumer confidence took a hit just as holiday spending ramps up. Some retail and travel names may experience soft earnings revisions as a result.
• The next shutdown showdown could reignite market stress, especially with no debt ceiling debate in sight.

💰 SoftBank sells its entire stake in Nvidia for $5.83 billion ( CNBC )

• SoftBank just cashed out its entire Nvidia stake for $5.83B. Not because it’s cooling on AI, but to reload for a $22.5B plunge into OpenAI and other AI bets.
• The move is part of a bigger capital shift: it also trimmed T-Mobile holdings and tapped margin loans on Arm . SoftBank needs over $30B for AI deals this quarter alone, more than it spent in the last two years combined.
• Despite selling Nvidia, it's not turning away from the chipmaker, it’s doubling down on AI plays that still rely on Nvidia tech.
• This news is not necessarily bearish for Nvidia, it’s just SoftBank redeploying the capital to OpenAI and AI infrastructure. Keep an eye out for any ripple effects in chip, robotics, and AI startup valuations.

💸 Anthropic Is on Track to Turn a Profit Much Faster Than OpenAI ( WSJ )

• Anthropic is projecting breakeven by 2028, while OpenAI plans to torch $74B in losses that same year, despite pulling in far more revenue.
• The divergence comes down to strategy: Anthropic is playing the lean, B2B game with Claude, avoiding compute-heavy ventures like video generation. OpenAI is going full throttle: robotics, Sora, hardware, ads, and a $1.4T data center binge.
• OpenAI’s “spend now, dominate later” approach could work if demand holds and funding flows. But in a market jittery about AI ROI, the burn rate may raise red flags.
• Anthropic’s slower burn and enterprise focus might make it IPO-ready sooner, while OpenAI is banking on future scale to justify today’s costs.
• Anthropic is aiming for profit discipline; OpenAI is betting the house on AI supremacy. For investors, it’s a question of durability vs dominance. When funding isn’t as easily accessible as it is today, their respective valuations will come down to the bottom line.

⚠️ Michael Burry has some concerns about AI accounting ( Sherwood )

• Michael Burry is calling foul on AI hyperscalers for stretching depreciation schedules on Nvidia GPUs, arguing they’re juicing earnings by underestimating wear-and-tear. Also worth noting is that his latest 13F filings have revealed he has short positions in Nvidia and Palantir .
• He claims firms like Oracle and Meta could overstate profits by 20-27% through 2028 by pretending high-octane GPUs have longer useful lives than their actual product cycles suggest.
• But the accounting isn’t cut and dry. Some older chips still fetch strong demand, and companies argue that chips shift from intense training to lighter inference tasks, extending their value.
• Still, inflated earnings now could mean nasty surprises later if depreciation catches up or if resale markets soften.
• If Burry’s right, AI capex darlings could be riding a temporary high. Watch for signs of margin pressure or revised depreciation schedules; those likely won’t be taken well by the market. Additionally, some cryptic posts indicate that he’s deregistering his Scion Fund with the SEC.

🏛️ The shutdown put jobs and inflation data on hold ( CNBC )

• The government shutdown put a freeze on major economic data like jobs and inflation, and agencies will need time to catch up even after Congress reopens.
• Expect delays across the board: October jobs numbers might land next week, but November reports could be pushed back at least a week.
• For investors, that means flying semi-blind on key Fed inputs like CPI, PCE, and payrolls, right when markets are hypersensitive to policy signals.
• However, Fed Chair Powell says the outlook hasn’t changed much, and they expect the official data to be largely the same as before: a slowing jobs market, inflation still above target, and positive, but not “gangbusters” growth.

🏦 Howard Marks highlights credit ‘carelessness’ but says issues are not systemic ( CNBC )

• Howard Marks is concerned about sloppiness in credit markets, pointing to bankruptcies like First Brands and Tricolor ( which we covered last week ). However, he says it’s not 2008 all over again.
• He argues we’re seeing the fallout from frothy times: high risk appetite, lazy diligence, and “carelessness” in lending, not a systemic breakdown.
• The warning is about discipline, rather than contagion. Lenders chasing yield in complex, opaque deals are now experiencing some risks come to fruition.
• We shouldn’t be surprised if we see some more defaults as the credit cycle normalizes, especially in sub-investment-grade and private credit.
• If you have exposure to junk debt or private credit, consider doing hypothetical stress tests on those holdings ahead of time to see how they’d fare in less frothy markets.

📅 Historical Context on Buybacks

Believe it or not, until the SEC adopted Rule 10b-18 in 1982 , share buybacks were actually considered illegal !

They were considered a form of market manipulation and were open to liability because they could be used to unfairly inflate a stock price. But that ruling created a “safe harbor” that permitted companies to conduct buybacks as long as they followed specific rules and conditions.

Since then, they have been a popular and tax-efficient method to return capital to shareholders.

As a quick reminder, buybacks matter because all else being equal, they:

1. Shrink the share count,
2. Lift earnings per share, and
3. Support valuations.

They also send a clear signal that management believes the stock is undervalued and that future cash flows are strong.

You can see in the chart below that, since 1988, momentum in share buybacks has not always been steady.

Source: S&P Global

During the pandemic years, repurchases slowed amidst the uncertainty, only to surge again a year later. In 2022 , they reached a new record. But that changed in 2023 when buybacks fell 13.8% year over year as valuations soared.

Instead of buying back their stock, companies had turned towards capital spending in areas like AI , where returns take time to materialize.

Last year, though, there was a shift, with companies repurchasing their shares again, and buybacks rose 11% year over year . Continuing into early 2025, Q1 saw a record of $293 billion in repurchases , mainly concentrated in the communication services (up 56% from the prior quarter) and information technology (up 26%) sectors.

For example, in August, chipmaker Nvidia announced it was increasing its buyback program by a record of $60 billion .

Political pressure has also played a role in the recent trend, as lawmakers pushed a new 1% excise tax on net buybacks .

While the levy may seem moderate, it was estimated to have shaved off approximately 0.39% of the S&P500’s operating earnings during the second quarter of 2025.

📈 Drivers Behind the Buyback Resurgence

Several reasons lie behind the resurgence of share repurchases.

1. 💪 Flexibility: Buybacks do not require an ongoing commitment, allowing for one-time repurchasing. Investors, however, tend to avoid companies that announce a regular dividend and then reduce the amount (or consistency) over time.
2. 💸 Tax considerations: Shareholders prefer the tax-efficient structure of a buyback compared to dividends, which are taxed as income upon receipt.
3. 📈 Changes in projected growth: Slower growth in core business lines is nudging companies towards a return of capital strategy. Especially as new investments in the latest technologies are taking time to see results.
4. 😤 Investor pressure: Individual and institutional investors also play a role, pushing the business to deliver shareholder returns rather than reinvest in new, uncertain lines of growth.
5. 💰Balance sheet strength: Mature firms (like Apple , Alphabet , and Nvidia ) have accumulated abundant cash reserves. This allows them the flexibility to return capital via buybacks.
6. 🔍 Valuation opportunities: When stocks are deemed undervalued, buybacks become an appealing use of capital.

⚠️ Risks & Limitations

One of the real risks of share buybacks is the opportunity cost.

Instead of using corporate profits to reinvest in the business, the company uses these funds to repurchase its shares instead. While it may boost the share price in the short term, it does little to support stock valuations over the long run.

✨ Companies repurchasing shares at a high valuation are another potential concern.

When a business buys stock at prices above its intrinsic value, they are effectively overpaying with shareholder capital. The optics of this are misleading, as it can lift EPS without the growth to back it up. This can, in turn, create the illusion of stronger fundamentals.

As Senator Elizabeth Warren , a critic of the practice, claimed, “ share buybacks are going into the market and pumping up the price of your shares by using your own cash, not to invest in business .”

And these days, it’s the reinvestment into artificial intelligence and semiconductors (at least for tech companies), that will drive the business’s profits even further in the years to come.

The shift towards buybacks also means there is less cash available for regular dividends. Prior to the 2000s, the dividend yield on US stocks sat between 3% and 6%. Now, Morningstar reports, that number has dropped under 2% .

Concentration risk is also a limitation.

As mentioned above, the top 20 companies in the S&P500 account for over half of its buybacks . This leaves repurchase activity heavily reliant on just a handful of mega-cap (mostly technology-based) businesses.

✨ That said, there is a time and place for buybacks and, under the right circumstances, they can be a real source of value for shareholders.

🔍 How To Assess Buyback Potential

Not all share buybacks are created equal.

Some signal a smart corporate strategy and offer long-term value creation. Others simply mask weak earnings growth. To distinguish between the two, consider the following:

1. 💰 Free cash flow strength. Does the business have robust, recurring cash flows? If so, they are in a better position for sustainable repurchasing. Nvidia’s strong FCF growth explains why they’ve restarted their program (chart below).
2. ⚖️ Low debt load. If a company already has a high debt load and must borrow more to fund potential buybacks, it could be stretching its balance sheet. In this case, they may not be a good candidate for buybacks.
3. 🔁 Consistent program. While share repurchases can be a one-off corporate move, some shareholder-friendly programs run across multiple quarters.

Nvidia Earnings, Revenue and FCF history - Simply Wall St

Investors should also watch for “cosmetic buybacks” where repurchases are offset by newly issued stock-based compensation. The headlines may look impressive, but in reality, the shareholders will see a negligible benefit.

💡 The Insight: Buybacks Create Shareholder Value Only When Fundamentals Support Them

For mature companies, returning cash through repurchases signals confidence. But only when it’s done at the right price and without sidelining other high ROI opportunities to reinvest in the business.

In the words of legendary investment mogul Warren Buffett : “ The best use of cash, if there is not another good use for it in business, if the stock is underpriced, is a repurchase.”

For investors, the real investment opportunity lies in identifying which buybacks reflect strong fundamentals and which are little more than financial window dressing.

With fair value estimates, you can see if the company is currently trading above or below its intrinsic value, indicating whether the business may find it timely to repurchase its shares.

We made this screener, Tech Stocks with Buybacks , and found 19 stocks that have buyback yields and are trading below the estimated fair value.

Source: Simply Wall St

Of course, you can save this screener and then adjust it as you see fit, but this should help to narrow down the list of potential candidates for you to consider, if you’re interested.

Also, the past performance and financial health sections of the company report allow you to evaluate a business’s fundamentals, checking for available free cash flow and debt levels.

If you put the stock on your watchlist, you’ll be notified of any important announcements regarding buybacks and stock issuances.

These tools can help you to stay on top of this trend and hopefully find a benefit from the renaissance of buybacks.

Key Events Next Week

Monday

• 🇯🇵 Quarterly GDP Growth Prel
  • ⬇️ Forecast: 0.1% Previous: 0.5%
  • ▶️ Why it matters: Slower growth keeps the BoJ cautious and can weigh on JPY and Japanese yields.

Tuesday

• 🇦🇺 RBA Minutes
  • ▶️ Why it matters: The tone on inflation and housing guides the path for cuts and can move AUD and front-end yields.

Wednesday

• 🇯🇵 Balance of Trade
  • ⬆️Forecast: ¥-150B Previous: ¥-234B
  • ▶️ Why it matters: A narrower deficit hints at firmer exports/lower imports, supportive for JPY and exporters.

Thursday

• 🇬🇧 Inflation Rate YoY
  • ⬇️ Forecast: 3.7% Previous: 3.8%
  • ▶️ Why it matters: Softer inflation keeps BoE cuts in play and tends to support government bonds over GBP.

Friday

• 🇬🇧 Retail Sales MoM
  • ⬇️ Forecast: -0.2% Previous: 0.5%
  • ▶️ Why it matters: Weaker spending flags slower growth and can pressure GBP and UK retailers.

Some more big names are reporting this week:

• Nvidia
• Walmart
• Home Depot
• PDD Holdings
• Intuit
• TJX
• Palo Alto Networks

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.