Big Tech is returning the smallest share of cash to shareholders in 15 years while AI spending nears $1T - rethink holding tech stocks?
I hold a broad tech ETF and a couple of individual names. The news this week is that Big Tech is returning the smallest share of its cash to shareholders in 15 years, while AI spending heads toward $1T. Buybacks and dividends are shrinking while capex explodes. For a long-term holder, is this a reason to trim, or is it just the cost of staying in the AI race? I am not looking to day trade, just trying to decide whether my allocation still makes sense.
1 answer
- Do not trim on buybacks alone
Buybacks shrinking is not the same as the business getting worse. If capex is building data centers that actually get rented out, the cash comes back as earnings later, just not as a buyback today. What would make me trim is if free cash flow itself fell while spending rose, or if the ETF fee and concentration bothered me. Check the free cash flow trend in the last two annual reports before you sell anything on a headline about payout ratios.