Capex boom threatens to crowd out buybacks, key equity demand driver
Yahoo Finance ·
Capex boom threatens to crowd out buybacks, key equity demand driver Simon Mugo Sat, June 27, 2026 at 10:32 PM EDT 2 min read GOOGL ^GSPC AMZN MSFT META Investing.com -- A surge in artificial intelligence-related capital spending is unlikely to undermine share buybacks across the broader U.S. equity market, according to a Deutsche Bank strategy note, which said record corporate earnings continue to support shareholder returns despite a sharp rise in investment spending. Capital expenditure across the S&P 500 has climbed from an annualized pace of roughly $1 trillion to about $1.5 trillion over the past two years. Around two-thirds of that increase has come from five hyperscalers: Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META) and Oracle (NYSE:ORCL). Those companies have sharply reduced share buybacks as they channel more cash into AI infrastructure and data centers while also raising fresh capital. Alphabet's recently announced secondary issuance alone exceeds total S&P 500 secondary issuance recorded during the first quarter. The spending, though, is also driving strong earnings growth among companies supplying AI infrastructure. Semiconductor makers, technology hardware firms, engineering companies, utilities, independent power producers, and data center REITs have all begun increasing their own share repurchases. Beyond those sectors, the remainder of the S&P 500 continues to generate the bulk of corporate earnings and buybacks. Quarterly net repurchases by this group have increased by nearly 30% over the past year, with further growth expected alongside earnings. Overall, S&P 500 net buybacks reached a record $270 billion during the first quarter, with gross buybacks climbing to about $300 billion. Current buyback levels remain broadly in line with historical relationships to both earnings and market capitalization. Attention has also turned to the recent jump in IPOs and secondary offerings. Equity issuance has accelerated sharply during the second quarter, with several additional large listings expected in the coming months. Even though the higher supply of shares could reduce net buybacks, previous issuance waves have typically coincided with strong investor demand and positive equity market returns. Rising inflows into U.S. equities, elevated household cash balances, and continued earnings growth are expected to provide support despite the increase in new share issuance. Capex boom threatens to crowd out buybacks, key equity demand driver This sector is 'poised for a big, beautiful year': Truist Morgan Stanley CIO survey: Why AI hype isn't boosting 2026 IT budgets
DYAX Investor Sentiment
Bullish (Long) 46% · Bearish (Short) 54%
468 participants
Related News
- Truist Increases Bank of America (BAC) Price Target, Cites Better-Than-Expected Trading Growth
- 1 Number MercadoLibre Investors Need to See
- Tesla Completes Key AI Chip Milestone in Its Push Beyond the Auto Industry
- Amazon quietly raises price tag on the AI boom
- Intel's AI Bet Is Finally Paying Off -- Is It Time to Reconsider This Stock?
- No quick fix to lowering gas prices despite Trump's protests, Chevron exec says