Are record share buybacks secret to stock market’s recovery?

Corporate America is buying back its own stock like there’s no tomorrow, raising concerns about how much of the market’s rebound is coming from actual investor demand.

As of May 2, American companies had announced over $600 billion in buybacks this year, the highest total ever recorded, according to Birinyi Associates.

That marks the third straight year of rising repurchase activity.

U.S. Companies are buying back stock at the fastest pace in history 🚨🚨 pic.twitter.com/ftNXyp6RTW

undefined Barchart (@Barchart) May 7, 2025

Buybacks happen for a few reasons. Some firms want to touch up financial metrics. Others simply have excess cash and see an opportunity with rising stock prices.

By reducing the number of shares on the market, buybacks can help push up a company’s stock price and earnings per share.

This year’s surge didn’t catch many off guard. Goldman Sachs had already predicted buybacks would top $1 trillion in 2025, with Big Tech leading the way. Apple, Nvidia, and Meta have all leaned into buybacks as a way to reward shareholders.

Apple set a new record last year, spending over $104 billion to buy back its own shares, the largest buyback in history.

"Earnings growth is the most significant driver of share repurchases at the index level, explaining about half of the year-to-year variation," Goldman analysts wrote in March 2024.

Buybacks usually help, until they don’t

On paper, buybacks do what they’re supposed to.

Research from S&P Dow Jones Indices shows that portfolios focused on buyback-heavy stocks have historically outperformed the broader market, especially during downturns.

But not all companies buy back stock like Apple or Nvidia. Some waste billions repurchasing shares at inflated prices, or when that money would’ve been better spent on actual business growth.

In some cases, buybacks are used to prop up earnings per share instead of creating real value. Analysts have pointed to Citigroup, General Electric, and IBM as examples of buyback programs that went wrong.

Even so, most experts agree that when done right, buybacks can be a good thing.

Warren Buffett has long supported them but as long as the price is right. “The math isn’t complicated,” he said.

“When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices.”