Companies are spending so much on AI they’re cutting share buybacks, Goldman Sachs says

Companies routinely buy back their own shares to incentivize investors for holding them, to reduce the number of shares available (thus boosting earnings per share), and to boost their own stock prices.

Normally, companies increase their buyback activity by about 20% each year, according to a note written by Goldman’s Ben Snider and colleagues. This year, that ground to a halt. In the second half of this year so far, buybacks across the S&P 500 have been flat.  

“S&P 500 companies repurchased shares at a record pace in 1H 2025, but buyback growth has recently stalled. S&P 500 buybacks in 1H 2025 totaled nearly $550 billion ($490 billion net of equity issuance). However, buybacks in 2Q 2025 were flat y/y for the S&P 500, the Magnificent 7, and the S&P,” Snider wrote. The Magnificent 7 companies are Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla.

“The Magnificent 7, which account for roughly 30% of S&P 500 gross buyback spending, posted 0% year/year buyback growth during the quarter,” Snider wrote.

The buybacks are on hold because the money is going into AI, Snider argues. So far this year, the “hyperscalers” (Amazon, Alphabet, Amazon, Meta, Microsoft, and Oracle) have spent $368 billion in capital expenditure, building their AI capabilities, Goldman previously estimated.

“Surging capex spending related to AI will likely prevent a major increase in the buyback payout ratio. The 2Q earnings season reaffirmed the ongoing corporate focus on AI investment spending, which appears to be crowding out buybacks. … S&P 500 companies reported 24% year/year capex growth during the quarter but reported -1% growth in gross buybacks,” Snider wrote.

Goldman forecasts that S&P 500 buybacks will begin rising again next year by 12% to $1.2 trillion but growth will be limited unless AI capex is scaled back.