By Jared Blikre

Stock buybacks are near historic highs. But their biggest benefit to investors — making each remaining share more valuable — is fading.

For years, companies reduced the number of shares available to investors. With the same profit divided across fewer shares, each share represented a larger claim on the business.

When the same profit is divided among fewer shares, earnings per share rises even if the company itself is not earning much more. Now the S&P 500's total share count is rising again, despite companies continuing to spend heavily on repurchases.

Bloomberg, Yahoo Finance

The difference between buyback spending and actual share reduction is crucial.

Companies can announce enormous repurchase programs while also issuing new stock through employee compensation, acquisitions, initial public offerings, and secondary sales. That is especially relevant in Big Tech, where stock-based compensation is a major part of employee pay.

Buybacks show how much companies spend. The total share count shows whether those purchases actually leave fewer shares in investors' hands.

The shift is arriving as companies redirect more cash toward capital expenditures — or capex — for data centers, chips, servers, networking equipment, and power.

As Jurrien Timmer, Fidelity's director of global macro, recently wrote, the "current capex boom is taking away the bandwidth for companies to buy back their shares."

Fidelity estimates buybacks have declined to roughly 31% of earnings as borrowing rises and companies invest in AI infrastructure.

The largest technology companies can still spend on both. But the cushion is narrowing.

Alphabet (GOOGL), Amazon (AMZN), Meta (META), Microsoft (MSFT), and Oracle (ORCL) collectively generated far more cash from their businesses than they spent building data centers and buying equipment only a few years ago. Current estimates show those totals converging as the AI build-out accelerates.

Bloomberg, Yahoo Finance analysis