Goldman Sachs Sees US Stock Buybacks Outpacing Equity Issuance as AI Funding Rises

Goldman Sachs expects corporate demand for U.S. equities to remain stronger than new share supply this year, despite a significant recovery in follow-on equity issuance driven partly by artificial intelligence investment.

U.S. companies raised about $105 billion through follow-on offerings through July, marking the highest year-to-date level since 2021. Total equity issuance, including IPOs, follow-ons, convertible securities and SPACs, reached a record $252 billion during the second quarter, surpassing the previous quarterly peak of $234 billion recorded in early 2021.

However, Goldman strategists led by Ben Snider said the increase represents a normalization of capital markets rather than an issuance boom. Both the number of transactions and issuance as a percentage of overall U.S. equity market capitalization remain below historical averages, while much of this year's activity has come from several large deals.

AI investment has emerged as a major source of financing demand. AI-related companies accounted for roughly 40% of U.S. follow-on equity issuance this year, and Goldman expects that contribution to increase.

Consensus forecasts indicate hyperscaler capital expenditures could reach $1.1 trillion in 2027, exceeding operating cash flow by approximately $150 billion before the companies return to positive free cash flow in 2028. Debt markets are expected to provide most of the required financing, with Goldman estimating hyperscalers could finance 35% of 2027 spending through debt, representing around $400 billion of global issuance.

Equity financing is also expected to remain important as companies pursue multi-year AI infrastructure investments while seeking to protect balance sheet strength and avoid excessive reliance on debt markets.

Despite rising equity supply, Goldman has not identified unusual signs of investor fatigue. Offering discounts and post-deal stock performance remain consistent with normal market conditions.

Corporate share buybacks could provide an even larger source of demand. S&P 500 repurchases grew about 11% year over year in the second quarter, while newly announced buyback authorizations approached a record $1 trillion year-to-date.

Goldman forecasts approximately $1.4 trillion in U.S. share repurchases this year, potentially absorbing roughly $700 billion of primary equity issuance and additional shares entering the market as post-IPO lockup periods expire.