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Or sign-in if you have an account.Of the four big spenders, Alphabet has been by far the largest buyer of its own stock. Over the past five years, the Google parent has plowed about US$280 billion into share repurchases. Photo by Jaque Silva/NurPhoto via Getty ImagesThe artificial-intelligence race is becoming so expensive that it’s snuffing out one of the key forces that has helped keep Big Tech stocks soaring for years: steady share buybacks.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorOf the four biggest AI spenders — Alphabet Inc., Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. — only Microsoft bought back shares in the first quarter. And its US$3.4 billion in repurchases was the lowest total among the group in nearly a decade, according to data compiled by Bloomberg.“The amount of capex that’s being spent is dramatically higher than even the high end of what anyone would have thought not just a year ago but three months ago,” said Robert Schiffman, a senior credit analyst at Bloomberg Intelligence. “Buybacks are likely to continue to fall as capital is prioritized for capex.”Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try againNot only have share repurchases slowed to a trickle, but some companies are issuing more stock to finance their AI ambitions. Alphabet Inc. is planning to raise about US$85 billion in its first equity sale in 20 years to help fund capital expenditures on data centres. And Facebook owner Meta Platforms Inc. is reportedly weighing an offering that could raise tens of billions of dollars.The disappearance of buybacks and the issuance of new equity represent the latest shift in the way technology giants operate as a result of heavy spending to add AI computing capacity. For years, part of the companies’ appeal was their capital-light businesses, but suddenly they’re capital intensive. With the four big AI spenders forecasting as much as US$725 billion in capital expenditures this year, and even more expected in 2027, the outlays are sucking up a larger proportion of free cash flow and prompting them to take on more debt.Buybacks are a tax-free way to return cash to shareholders. By plowing a chunk of their earnings into repurchases, the companies reduce the number of shares outstanding, which has the effect of boosting earnings per share and ultimately the stock price. Naturally, they’re quite popular with investors.Without that lever, however, the tech giants face more pressure to deliver commensurate returns on invested capital, according to Brent Fredberg, portfolio manager and tech sector analyst at Brandes Investment Partners, which has US$43 billion in assets.“The risk profile has changed,” he said. “Over the past decade they were capital light and had huge network effects. But increasingly free cash flow is declining, balance sheets are less attractive but still strong, and now they’re going from buying back shares to issuing shares and they’re starting to bump into each other competitively.”Of the four big spenders, Alphabet has been by far the largest buyer of its own stock. Over the past five years, the Google parent has plowed about US$280 billion into share repurchases, or more than six per cent of Alphabet’s current market capitalization, according to data compiled by Bloomberg. The first quarter marked the first time Alphabet didn’t buy back shares in nearly 10 years after spending more than US$15 billion on repurchases in the same period a year ago.Of course, not all tech giants have altered their approach to capital returns. Apple Inc. has continued its buybacks while avoiding big capital spending in favour of partnering with companies like Google to help power AI features. In April, the iPhone maker authorized US$100 billion for share repurchases, the same as the previous year. Apple also raised its quarterly dividend by four per cent to 26 cents U.S. a share.Nvidia Corp., which is one of the major beneficiaries of all this AI spending, also is actively buying back its stock. Last month, the chip giant earmarked US$80 billion for repurchases, following a US$60 billion authorization in August. Nvidia spent roughly US$20 billion on buybacks in its fiscal first quarter, which ended in January, up from about US$14 billion a year ago.For now, investors are giving the biggest capex spenders the green light to dedicate their cash to building out AI rather than buying back more shares. For example, Alphabet shares are up 17 per cent this year while the S&P 500 is up 9.5 per cent.How long that patience lasts, however, is another question.“These companies have enough access through public and private markets that there’s more than enough capital to fund these guys even if capex numbers grow dramatically,” said Schiffman. “The caveat that would provide real problems is a macro issue or capital markets close. That would be the real challenge.”—With assistance from Subrat Patnaik. 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