Why Apple is Spending $700 Billion on Buybacks Their Own Stocks, Instead of Using it For Developing an AI
- Apple has spent over $700 billion on buybacks to reduce its available stock by nearly 35 percent in ten years.
- Critics worry this spending signals a lack of innovation while supporters praise the financial discipline compared to AI hype.
Tech giants love to brag about returning capital to shareholders. They usually do this through massive stock buyback programs that grab headlines. But simply spending cash on shares does not always equal real value for investors. The only metric that truly matters is net buybacks. This happens when a company actually reduces its total share count and significantly increases the ownership stake of everyone left holding the stock.
Think of the stock market capitalization like a pizza. If you cut the pizza into fewer slices then each individual slice gets bigger. That is exactly how net buybacks work for earnings per share. When a company retires stock the remaining shares become more valuable because they represent a larger claim on profits. This creates a powerful compounding effect that can drive stock prices higher even if the company's overall net income stays flat.
We analyzed the market to find the companies mastering this strategy. The search started with the information technology sector of the S&P 500 and the Nasdaq 100. We filtered for reputable companies that went public at least a decade ago. The crucial test was a consistent reduction in share count over one year five years and ten years. This rigorous screening process whittled a list of over 80 tech names down to just over 30 elite performers that treat their equity like gold.
Apple stands alone at the very top of this mountain. The iPhone maker has spent a staggering $708.7 billion on buybacks over the last decade. That massive financial outlay has reduced their diluted share count by nearly 35 percent. In the most recent fiscal quarter alone Apple dropped over $20 billion to repurchase its own stock. This effectively engineers growth by manipulating the denominator of the earnings equation.
This spending habit paints a stark contrast to the rest of Big Tech right now. Companies like Microsoft and Meta are currently pouring tens of billions into capital expenditures for artificial intelligence infrastructure. Apple has taken a distinctly different path. They chose to return cash to shareholders rather than buying acres of expensive Nvidia chips. This divergent strategy has sparked a heated debate on Wall Street about the best use of capital.
Some analysts see this as a sign of maturity and discipline. Seaport Research analyst Jay Goldberg argues that there is no need for Apple to burn cash until they have a clear strategy. He believes the company is right to wait rather than panic spending just to look busy in the AI space. This cautious approach appeals to investors who are growing wary of the massive AI bills piling up at other firms without immediate returns.
Others see potential danger in this strategy. Critics argue that aggressive buybacks signal a lack of innovation. Quinnipiac University professor Alexander Laskin points out that Steve Jobs hated buybacks for this exact reason. Jobs believed cash should fund the next big thing. The fear is that Apple is propping up its stock price today at the expense of its technological future.
The market is currently wrestling with these two opposing viewpoints. Apple stock lagged behind its peers for much of the year but has recently started to outperform. Investors are beginning to question the return on investment for massive AI spending elsewhere. If the AI bubble bursts then Apple’s boring buyback strategy might just end up looking like the smartest move in the room.