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

Jim Edwards is the executive editor for global news at Fortune. He was previously the editor-in-chief of Business Insider's news division and the founding editor of Business Insider UK. His investigative journalism has changed the law in two U.S. federal districts and two states. The U.S. Supreme Court cited his work on the death penalty in the concurrence to Baze v. Rees, the ruling on whether lethal injection is cruel or unusual. He also won the Neal award for an investigation of bribes and kickbacks on Madison Avenue.

One unexpected side effect of the Magnificent 7’s race to build massive AI data centers—and

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

Normally, companies increase their buyback activity

“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