S&P 500 Heads Into Second Half of 2025 With Record Stock Buyback Potential
S&P 500 companies have authorized a record $750 billion in stock buybacks so far this year.
Executives spent nearly $300 billion of that on repurchases in the first quarter when trade uncertainty plunged stocks into correction territory.
The tech companies that have accounted for the bulk of buybacks so far this year have committed to dramatically increase their AI investments, a potential headwind for buybacks later this year.The S&P 500 has authorized record stock buybacks so far this year in what could be a lifeline for the stock market in turbulent times.
As of June 5, directors of S&P 500 companies had given management permission to spend a cumulative $750 billion on share repurchases, a big jump from the $600 billion authorized by the same time in 2023 and 2024, according to recent research from LPL Financial. Approximately 80% of this year's total buyback authorization is concentrated in three sectors: communication services ($210 billion), financials ($200 billion), and information technology ($196 billion).
Record authorizations gave executives plenty of dry powder to use when the S&P 500 slid into correction territory in March. S&P 500 companies spent $283 billion on buybacks in the first quarter, a 24% increase from the fourth quarter and 27% above the same period last year. Tech giants were the most active buyers; Apple (AAPL), Meta (META), Alphabet (GOOGL) and Nvidia (NVDA) spent a cumulative $73 billion last quarter.
Buybacks, by supplementing demand from individual and institutional investors, have the potential to support stock prices during drawdowns like those seen earlier this year. There's also evidence to suggest they lower trading costs for everyday investors. A 2021 U.S. Chamber of Commerce study found that the liquidity and price discovery benefits provided by corporate buybacks had saved retail investors between $2.1 billion and $4.2 billion since 2004.
But a buyback authorization doesn't guarantee shares will be repurchased. Market conditions, valuations, and management teams' priorities together determine whether buybacks happen. Stock prices have rebounded from their mid-April lows, putting the S&P 500's P/E ratio about where it was at this time last year when threats to inflation and growth paled in comparison to today's. That, plus lingering uncertainty about the economic impacts of tariffs, could temper corporate America's appetite for buybacks.
Plus, the companies that have spent the most on buybacks in recent years are also the ones dramatically increasing their business investments. Microsoft (MSFT), Amazon (AMZN), Alphabet, and Meta plan to spend more than $300 billion on AI infrastructure and other capital expenditures this year, a 35% increase from 2024.
Amazon is an illustrative example of the way business expenses and investments can preclude repurchases. The company's board approved a $10 billion buyback program in early 2022. Amazon spent about $4 billion of that shortly thereafter but hasn't purchased any shares since. Over the same period, capex spending has soared from about $63 billion to an estimated $104 billion.
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