For years, Amazon.com Inc. has been the stingiest among tech megacaps to give back capital to shareholders. Now, it’s generating so much cash that some on Wall Street are anticipating more generous returns.

After a record haul of US$32 billion in free cash flow last year, Amazon is projected to nearly double that in 2024, according to data compiled by Bloomberg. With Big Tech acquisitions increasingly facing regulatory opposition, Amazon has fewer options on how it chooses to deploy that cash, according to Robert Schiffman, a senior credit analyst at Bloomberg Intelligence.

“This suggests not only rising share buybacks, but a more aggressive capital return policy that could include a dividend,” said Schiffman. “If returns don’t increase, cash balances could soar above $100 billion later this year.”

Amazon had more than $86 billion in cash at the end of 2023.

For most of its three decades in existence, Amazon has opted to plow its cash back into the business. The last buyback was for $10 billion in 2022, which is a pittance compared with similar sized peers.

In 2023, Alphabet Inc. repurchased more than $60 billion in shares, according to data compiled by Bloomberg. Facebook-parent Meta Platforms Inc. spent more than $20 billion on buybacks in the same period and in February pledged an additional $50 billion, while initiating its first-ever quarterly dividend.

Amazon, by contrast, didn’t buy back any shares in 2023. A change in its capital-return policy would signal a shift as the company evolves under Chief Executive Officer Andy Jassy, who took the reins from co-founder Jeff Bezos in 2021.  

Amazon shares have managed to outperform even in the absence of big buybacks. The stock has climbed 20 per cent this year, pushing its market value to $1.9 trillion as analysts continue to hike profit estimates and traders grow increasingly optimistic about artificial intelligence helping to reinvigorate growth at Amazon Web Services.

The Nasdaq 100 has gained 8 per cent over the same period.

Still, while Amazon is on the cusp of setting a new all-time high, it’s alone among the five biggest US tech companies that isn’t yet in record territory. Microsoft Corp., for example, is trading about 20 per cent above its 2021 record, while Meta is up more than 30 per cent from its previous peak in the same year.

Naveen Jayasundaram, senior research analyst at ClearBridge Investments, expects Amazon to announce a buyback in the tens of billions of dollars sometime this year, but sees a dividend as unlikely.

“I think Amazon views itself as being earlier in the growth cycle compared with Alphabet and Meta, so I would be surprised if we got a dividend this year,” said Jayasundraram. “However, it does seem like something that could come in the next four to five years.”

Amazon is expected to report first-quarter earnings later this month. Even though the company is still cutting costs, it has plenty to spend on. Amazon plans to pour almost $150 billion in the coming 15 years on data centers to handle an anticipated explosion in demand for digital services related to AI.

That type of spending is critical to Amazon defending its turf from competitors and should take precedence over capital returns, according to Cyrus Amini, chief investment officer at Helium Advisors.

“I wouldn’t be disappointed if it did a buyback, but I would be surprised,” he said. “Amazon is still growing, and it needs to keep spending to protect its moat.”

The Philadelphia Stock Exchange Semiconductor Index, which is made up of 30 chip companies, has rallied nearly 60 per cent over the past 12 months. The chip benchmark, also known as SOX, has been boosted by strong showings from AI beneficiaries including Nvidia Corp., Broadcom Inc. and Micron Technology Inc., helping it outperform the S&P 500 Index.

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With assistance from Matt Day and Subrat Patnaik.