BlackRock’s chief investment officer says investors can no longer rely on the same technical support that buoyed hyperscaler stocks in recent years.
In a CNBC interview, Rick Rieder says his team has adjusted BlackRock’s positioning across major cloud and AI infrastructure names as capital spending accelerates and market dynamics shift.
“I think how you think about different hyperscalers, and without going through individual names, we’ve adjusted some of our positioning around that because, quite frankly, I think you need to see the IRR (internal rate of return), and you need to see the durability of some of the businesses underneath it.”
Rieder highlights a powerful force that had previously supported and lifted mega-cap share prices. But he notes that the support is fading as hyperscalers pile their free cash flow and more into AI spend, amounting to about $655 billion this year.
“The amount of buyback we saw from hyperscalers over the last couple of years was immense, that you knew you had a backbone of buying into those names, that any time you had any real pressure, you knew the buybacks would come in.
I still like, if you said on an aggregate basis, I still like the hyperscalers quite a bit. I still think it’s incredible how much top-line revenue they throw off, how much it drops down in terms of free cash flow. Clearly, a bunch of that would have gotten into free cash flow now is getting into CapEx.”
But Rieder says that the shift is an investment in future returns rather than an outright negative.
“What is CapEx? CapEx is your future ROI, or your future ROE in terms of your business model. I think there’s a near-term dynamic around it.”
In 2025, US share buybacks shattered $1.1 trillion, a new record high, and were widely seen as a catalyst that powered strong stock performance. But data from Citadel Securities show that stock buybacks this quarter stand at about $120 billion, the lowest level in half a decade.
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