US markets could be losing a tailwind this year as companies slow their share buybacks in favour of capital expenditure.
Share buybacks reduce the number of shares in issue and mathematically provide a boost to earnings per share.
Let’s say you own an equal share in a business with three friends and one of them wants out. After agreeing on a price, your ownership increases to one third of the business from a quarter, giving you a greater share of the profits.
This has happened at scale across the US with share buybacks increasing dramatically in recent years. S&P 500 buybacks topped $1 trillion in 2025 and are on target to reach $1.1 trillion in 2026, having hit a record $422 billion so far in 2026, according to Goldman Sachs.
Analysts estimate buybacks have added between 1% and 2% annually to earnings per share growth over the last decade. In other words, share buybacks have acted as a tailwind for earnings and share prices.
Share buybacks create additional demand
Not only do buybacks mechanically increase earnings per share, but they also reduce the supply of outstanding shares.
When Apple authorised a new $100 billion share buyback in May 2025, it means the broker executing the buyback acted like a support for the share price, mopping up any supply.
The top 20 companies in the S&P 500, which is dominated by big technology companies, contributed roughly half the value of total buybacks in the S&P 500 in 2025.
Does spending on AI infrastructure change the picture?
The major AI hyperscalers (Amazon, Alphabet, Meta, Microsoft, and Oracle) have significantly reduced or paused buybacks to fund AI infrastructure spending, which could top $700 billion in 2026.
With capital expenditures now expected to consume close to 100% of operating cash flows for the hyperscalers over the next two years, there is little left over for increased shareholder returns via buybacks.
These companies have increasingly turned to the debt markets for extra funding with over $120 billion in new corporate debt issuance.
Just to give a sense of the scale, in February 2026 Alphabet issued roughly $32 in debt over a 24-hour period, which followed on from $20 billion dollar debt issue a few days prior.
How might IPOs (initial public offerings) affect markets?
After many years in hibernation, analysts estimate the current pipeline of US IPOs is the strongest in five years. Between $250 billion to $300 billion of new equity is slated to come to the market across 2026 and 2027.
So far in 2026, there have been 22 IPOs raising over $9 billion driven by AI-related infrastructure demand.
This could include eleven-year-old chip designer Cerebras, which is positioning itself as a faster alternative to Nvidia and AMD and expected to come to market as early as 14 May.
The demand has been so intense that the IPO price range was raised from $115–$125 to $150–$160 per share, with interest running at 20 times the available supply. Morgan Stanley is now asking institutional investors to submit limit orders where buyers specify a maximum price.
At the top end of the range, Cerebras would have a market value of $34 billion and is expected to raise up to $5 billion of new shares.
However, this pales in comparison with Elon Musk’s SpaceX, which could be valued at $1.75 to $2 trillion dollars and is expected to raise proceeds of between $30 billion and $75 billion.
For context, the IPO would be around 2.5 times Saudi Aramco's $29.4 billion raise, making it by far the largest IPO in history.
If SpaceX’s IPO is successful, Google owner Alphabet, who already owns a stake, would hold a $122 billion position in the space company. Reports from Bloomberg confirm a June target, though insiders acknowledge the timeline could slip to late 2026 or early 2027.
Artificial intelligence pioneer and ChatGPT owner OpenAI is expected to be valued at $730 billion and looking to raise between $10 billion to $60 billion in new equity.
If this comes to fruition it would value Microsoft’s 27% stake at close to $200 billion.
In total Goldman Sachs estimates 2026 IPO proceeds could top $300 billion at the top end of forecasts making it the best year for IPOs since 2021.
Why does all this matter?
The combination of significantly reduced share buybacks from big technology companies and the potential issuance of new equity from the largest IPOs ever seen presents a challenge US markets have not seen in decades.
With the S&P 500 trading at its highest valuation since 2000 and interest rates remaining stubbornly elevated, faith in AI’s potential to deliver will be put to the test.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...
