The era of hyperscalers showering shareholders with stock buybacks is fading fast. Buybacks at the largest technology companies fell 64% year over year in the first quarter of 2026 as free cash flow got redirected almost entirely toward AI infrastructure, according to figures cited by Yahoo Finance. Buybacks and dividends combined now account for just 20% of total spending at major tech firms, down sharply from an average of 34% between 2017 and 2022, marking one of the clearest signals yet of how thoroughly the AI buildout has reordered corporate priorities.
Capex Is Swallowing Cash Flow Whole
Wall Street analysts now expect megacap US hyperscalers to plow roughly $755 billion into capital expenditures in 2026, an 83% jump from the prior year. Individual commitments illustrate the scale: Microsoft raised its 2026 capex outlook to about $190 billion, a potential 130% year-over-year increase, while Amazon lifted planned spending to roughly $200 billion to accelerate data center construction and warehouse robotics. Alphabet and Meta have both pushed their targets into the $180 billion-to-$190 billion and $125 billion-to-$145 billion ranges, respectively. Across the S&P 500, capital expenditure is projected to hit roughly $2 trillion in 2026, up 33% year over year, while buybacks across the index are expected to grow just 3%, to about $1 trillion.
A Reversal of a Decade-Long Pattern
For much of the 2010s and early 2020s, mega-cap tech companies were famous for returning enormous sums to shareholders through buybacks, often exceeding what they spent on physical infrastructure. That playbook has effectively been suspended. Goldman Sachs strategist Ben Snider noted that companies are now allocating roughly 55% of cash spending to capex and R&D combined, versus about 35% to buybacks and dividends, a sharp departure from the prior decade’s average. The shift reflects a belief among boards and CEOs that failing to secure enough compute capacity now could permanently cede ground to competitors in the AI race, even at the cost of near-term shareholder returns.
Nvidia Is the Striking Exception
While most hyperscalers are pulling back on buybacks, Nvidia has moved in the opposite direction. The chipmaker’s board increased its stock buyback authorization by $80 billion in its most recent quarter, pushing its total active authorization above $120 billion, on top of an increased dividend. Because Nvidia sits on the selling side of the AI infrastructure boom rather than the buying side, its cash generation has scaled with the very capex wave that is straining its customers’ balance sheets, giving it room to reward shareholders even as Microsoft, Amazon, Alphabet and Meta redirect cash elsewhere.
Bulls Say This Is Discipline, Not Distress
Supporters of the shift argue it reflects rational capital allocation rather than financial strain. With capex now consuming close to 100% of operating cash flow at some hyperscalers, proponents say redirecting funds from buybacks into AI infrastructure is simply management responding to the highest-return opportunity available, especially with cloud AI services still commanding premium pricing and long enterprise waitlists. From this view, a temporary pause in buybacks is a small price for capturing a generational infrastructure buildout.
Skeptics Warn of a Cash Flow Squeeze
Others see a warning sign. With capex absorbing effectively all operational cash flow, some hyperscalers are turning to debt issuance or drawing down cash reserves to sustain both infrastructure spending and any remaining shareholder returns, according to the same Yahoo Finance analysis. Critics argue that if AI revenue growth disappoints or monetization lags the pace of spending, companies that have already cut buybacks to the bone will have fewer levers left to reassure investors, having already sacrificed the shareholder-return cushion that helped support their stock prices during past downturns.
What to Watch Going Forward
Investors are likely to scrutinize upcoming earnings calls closely for any signal that hyperscalers plan to restore buyback programs, which would suggest management sees capex peaking, or instead push spending even higher, which would confirm the AI arms race shows no sign of slowing. Analysts will also watch whether other AI beneficiaries follow Nvidia’s script of expanding buybacks while its customers cut theirs, a dynamic that could widen the gap between AI’s suppliers and its heaviest spenders well into 2027.