## How Tech Companies Invest Their Cash
Tech companies are sitting on a mountain of cash. As of the end of 2021, the five largest tech companies—Apple, Microsoft, Alphabet, Amazon, and Meta—had a combined cash balance of over $480 billion. That’s more than the GDP of many countries.
So what do tech companies do with all that cash? They invest it, of course. But how they invest it varies widely. Some companies, like Apple, prefer to keep their cash on hand for acquisitions and stock buybacks. Others, like Alphabet, invest heavily in research and development. And still others, like Amazon, use their cash to fund new businesses.
Here’s a closer look at how some of the biggest tech companies invest their cash:
### Apple
Apple is the world’s most valuable company, and it has the largest cash balance of any company in the world. As of the end of 2021, Apple had over $200 billion in cash on hand.
Apple is very conservative with its cash. The company prefers to keep its cash on hand for acquisitions and stock buybacks. Apple has made a number of large acquisitions in recent years, including the $3 billion purchase of Beats Music in 2014 and the $1 billion purchase of Shazam in 2018. Apple has also used its cash to buy back its own stock, which has helped to boost its share price.
### Microsoft
Microsoft is another tech giant with a large cash balance. As of the end of 2021, Microsoft had over $130 billion in cash on hand.
Microsoft is more aggressive with its cash than Apple. The company invests heavily in research and development, and it also makes a number of acquisitions. In recent years, Microsoft has acquired companies such as LinkedIn, GitHub, and ZeniMax Media. Microsoft also uses its cash to fund new businesses, such as its cloud computing platform Azure.
### Alphabet
Alphabet is the parent company of Google, YouTube, and other businesses. As of the end of 2021, Alphabet had over $120 billion in cash on hand.
Alphabet is one of the most research-intensive companies in the world. The company spends over $20 billion per year on research and development. Alphabet’s research efforts have led to the development of a number of new products and services, such as the Google Assistant, Waymo self-driving cars, and DeepMind artificial intelligence.
### Amazon
Amazon is the world’s largest online retailer. As of the end of 2021, Amazon had over $100 billion in cash on hand.
Amazon is very aggressive with its cash. The company uses its cash to fund new businesses, such as its cloud computing platform AWS, and to make acquisitions. In recent years, Amazon has acquired companies such as Whole Foods Market, Zappos, and MGM Studios. Amazon also uses its cash to invest in its core businesses, such as its retail operations and its logistics network.
### Meta
Meta is the parent company of Facebook, Instagram, and WhatsApp. As of the end of 2021, Meta had over $50 billion in cash on hand.
Meta is investing heavily in the metaverse, a virtual world where people can interact with each other and with digital objects. Meta is also investing in artificial intelligence, which it believes will be the foundation of the metaverse. In addition, Meta is investing in new hardware, such as its Quest 2 virtual reality headset.
## How Tech Companies Should Invest Their Cash
There is no one-size-fits-all answer to the question of how tech companies should invest their cash. The best investment strategy for a particular company will depend on a number of factors, such as its size, its industry, and its financial goals.
However, there are some general principles that tech companies should keep in mind when investing their cash. First, tech companies should invest in businesses that they know well. This means investing in businesses that are related to their core competencies and that they have a good understanding of. Second, tech companies should invest in businesses that have the potential to grow. This means investing in businesses that have a large addressable market and that are led by a strong management team. Third, tech companies should invest in businesses that are financially sound. This means investing in businesses that have a strong track record of profitability and that are not overly leveraged.
By following these principles, tech companies can increase the chances of making successful investments and generating long-term value for their shareholders.
## Conclusion
Tech companies have a lot of cash on hand, and they are constantly looking for ways to invest it. There is no one-size-fits-all answer to the question of how tech companies should invest their cash, but there are some general principles that they should keep in mind. By following these principles, tech companies can increase the chances of making successful investments and generating long-term value for their shareholders.