Overview
Surging capital expenditure aimed at artificial intelligence (AI) infrastructure has raised concerns that corporate investment could reduce the flow of cash returned to shareholders through buybacks. A recent Deutsche Bank strategy note, however, finds that the bulk of buyback activity across the S&P 500 remains resilient, supported by record corporate earnings and rising repurchases outside the handful of largest spenders.
Where the spending is concentrated
Capital expenditure across the S&P 500 has risen from an annualized run rate near $1 trillion to roughly $1.5 trillion over the past two years. Roughly two-thirds of that incremental spending has been concentrated in five hyperscale companies: Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META) and Oracle (NYSE:ORCL).
Those firms have redirected cash into AI infrastructure, including data centers, and have trimmed share repurchases as they increase investment and tap fresh capital markets. The note highlights that Alphabet’s recent secondary share issuance alone is larger than the total secondary issuance recorded across the entire S&P 500 during the first quarter.
Offsetting forces in the market
At the same time, the AI-related capex wave has generated meaningful demand for suppliers and related industries. Semiconductor manufacturers, technology hardware companies, engineering firms, utilities, independent power producers and data center real estate investment trusts have seen robust earnings growth and have begun to step up their own share repurchases.
Beyond these sectors, the remainder of the S&P 500 continues to account for the majority of corporate profits and buyback activity. Quarterly net repurchases by this broad group have climbed by nearly 30% over the past year, and Deutsche Bank expects further growth in repurchases to accompany continued earnings gains.
Current buyback metrics
Overall, net buybacks for the S&P 500 reached a record $270 billion in the first quarter, with gross buybacks near $300 billion. Deutsche Bank notes that current buyback levels remain broadly consistent with historical relationships to both corporate earnings and total market capitalization, suggesting the capex surge has not materially broken established patterns of shareholder returns.
Equity issuance trends
Attention has also turned to a pickup in initial public offerings and secondary share offerings. Equity issuance accelerated sharply during the second quarter, and several additional large listings are expected in the coming months. While higher share supply has the potential to reduce net buybacks, prior waves of issuance have typically coincided with strong investor demand and positive market returns.
Market support factors
Deutsche Bank highlights a set of market-side supports that should help absorb increased issuance and sustain buybacks: growing inflows into U.S. equities, elevated household cash balances, and persistent earnings growth. These elements are expected to underpin demand even as some large companies divert more cash toward AI-related capital projects.
Conclusion
While a narrow group of hyperscalers has materially increased capex and scaled back buybacks, the broader S&P 500 has maintained strong shareholder return activity. Suppliers benefiting from AI investment have increased repurchases, and the majority of index members continue to drive earnings and buybacks higher. Taken together, these dynamics suggest the AI capex boom has not yet displaced the wider buyback trend.