Tech companies have seen their stocks soar, but that's not all they can do for shareholders. It's time they share the wealth.
Nearly all companies related to artificial intelligence had a great second quarter, but semiconductor firms and hardware makers stand out. They "continue to reflect the 'greatest cash transfer in history' as operating cash flows from hyperscalers are transferred right into their bank accounts," as Melius Research Head of Technology Research Ben Reitzes puts it.
However, not all big tech is created equal. Many companies are big spenders given the cost of AI development; in some cases they don't have free cash flow anymore, and that makes it even trickier for investors to find a fair value for the shares.
By contrast, companies like Apple and Nvidia should be able to shine, he argues, since they have plenty of cash on hand. However, their stocks haven't lived up to their full potential, Reitzes believes, because they haven't actually shared that money with investors.
"Apple, please explain in plain English your buyback plans since the formal ending of the 'net cash neutral policy' is confusing," he writes. "Nvidia, about 50%+ cash return is nice but aim bigger and absorb your forced sellers in the second half of calendar 2026 as you crush numbers."
Certainly, many tech companies can afford it, given that operating cash flow in the sector is near highs, as Trivariate Founder Adam Parker notes. While the sector's cash flow is cyclical, its growth is the highest it's been in a quarter century.
Others have been putting that money to use, specifically through share repurchases. "The median net buyback as a percentage of operating cash flow dollars is at an all-time high in Technology at 44%," Parker writes. "At the same time, dollar weighted dividends will be at more than a 20-year low at 12%."
Rewarding shareholders can also be like helping themselves. A quick look at the biggest tech winners in terms of stock price performance in the second quarter shows Sandisk and Micron soared over 200%, with Dell up some 150%. Those winners and others "are going to start buying back a ton of stock too with their newfound wealth," Reitzes writes, arguing that such repurchases could further bolster their rallies.
Sounds like a win-win.
Write to Teresa Rivas at teresa.rivas@barrons.com
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(END) Dow Jones Newswires
July 02, 2026 13:46 ET (17:46 GMT)
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