About three decades ago, the advent of the Internet forever changed the landscape of corporate America. The Internet opened up new distribution channels that did not exist before and vastly expanded addressable markets, particularly abroad.

Since the advent of the Internet, numerous groundbreaking innovations have emerged that promise big dollar amounts. However, the vast majority have failed so far, including 3D printing, blockchain technology and the metaverse.

But after a long wait, Wall Street and investors may be witnessing their next leap forward for corporate America: artificial intelligence (AI).

AI is a $15.7 trillion opportunity that Wall Street and leading companies cannot ignore

What makes AI so attractive is its almost unlimited long-term ceiling. AI-driven software and systems become increasingly better at the tasks assigned to them and, over time, have the ability to evolve and learn new tasks without the need for human intervention. This means AI can improve productivity and increase consumer/business demand in most industries around the globe.

Although addressable market estimates vary widely, as one would expect with any early-stage innovation, analysts at PwC believe AI is nothing short of a game changer. In Measurement of the pricePwC predicts a 26% ($15.7 trillion) increase in global gross domestic product by 2030, all due to the impact of artificial intelligence.

The face of the AI ​​revolution, semiconductor colossus Nvidia (NVDA -0.16%)shone brightest. Nvidia has added more than $3 trillion in market value since the start of 2023 (through the closing bell on December 23, 2024), and overwhelming demand for its AI graphics processing units (GPUs) was the main catalyst.

Nvidia charged up to four times more for its Hopper (H100) GPU Advanced micro devices scores with its Insight MI300X chips. Additionally, Blackwell’s successor GPU architecture offers improved power efficiency and faster computing speeds, which should secure Nvidia as the AI ​​GPU market leader for the foreseeable future.

There is no question that companies are investing aggressively in AI. Social media connoisseur Metaplatforms (META -0.49%) is investing about $10.5 billion to purchase 350,000 Hopper chips from Nvidia to advance its AI data center ambitions. In addition, Meta is internally developing its own AI chip for use in its data centers, the so-called Meta Training and Inference Accelerator.

The situation is similar with Google Parent alphabet (GOOGL 0.06%) (GOOG 0.06%)which is one of Nvidia’s largest customers in terms of net sales. Google Cloud is the world’s third-largest provider of cloud infrastructure services and generative AI solutions are expected to play a key role in sustaining double-digit growth in this high-margin segment. Similar to Meta, Alphabet is internally developing an AI chip called Trillium.

Even a smartphone giant Apple (AAPL 0.41%) spends a lot on AI innovations. But while Meta and Alphabet rely on Nvidia’s superior hardware, Apple chose Google’s Tensor processing units to train its Apple Intelligence model. This is the recently launched learning tool designed to help iPhone, iPad and Mac users generate information (text and images) and process data quickly.

However, the money these four prominent AI stocks are spending on another “project” dwarfs their AI investments.

Nvidia, Meta, Alphabet and Apple spent a combined $1.23 trillion on a shocking investment

If you look at the cash flow statements of Nvidia, Meta, Alphabet, and Apple, you’ll see that tens of billions of dollars are spent on research and development (R&D). But there’s another category of spending that consumes a combined $1.23 trillion – YesTrillion – in total capital invested in these four major AI stocks over the last decade ending September 30, 2024.

The shocking investment that Nvidia, Meta, Alphabet and Apple seem to have prioritized, in some cases even more than R&D, is (drum roll) stock buybacks!

According to calculations by S&P Global, S&P 500 Companies have repurchased $7.11 trillion worth of stocks over the past decade, with the 20 companies that made the largest repurchases in the third quarter of 2024 accounting for 34% of that total. The cumulative amount spent on share buybacks for the above four AI giants is:

• Apple: $695.312 billion
• alphabet: $286.684 billion
• Metaplatforms: $186.187 billion
• Nvidia: $63.828 billion

In total, that’s $1.232 trillion invested in buybacks.

NVDA share repurchases data (quarterly) from YCharts.

If you’re racking your brain wondering why some of Wall Street’s most historically innovative companies are withdrawing money from research and development and/or acquisitions and instead opting to buy back their own shares, there are three likely answers.

For starters, stock buybacks can boost earnings per share (EPS) for companies with stable or growing net income—and all four of these AI leaders meet this criteria. Dividing a company’s net income into a decreasing number of shares outstanding should increase earnings per share and make it fundamentally more attractive to investors.

Second, a steady stream of buybacks signals to investors that a company’s board/management team still views their shares as good value. While the same goes for insiders who put their money to work by buying on the open market, buybacks are just icing on the cake while a company’s operating forecasts are the be-all and end-all.

A possible third reason that Nvidia, Meta, Alphabet and Apple have spent much more on stock buybacks than on AI innovation could be that they have more cash and operating cash flow than they know what to do with. Over the last 12 months, the operating cash flow of these giants was as follows:

• Nvidia: $48.7 billion
• Metaplatforms: $82.7 billion
• alphabet: $105.1 billion
• Apple: $118.3 billion

These four leading AI companies have the luxury of buying back their shares and taking risks because they have outsized operating cash flow and already have huge cash piles on their respective balance sheets.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Sean Williams holds positions at Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Meta Platforms, Nvidia and S&P Global. The Motley Fool has a disclosure policy.