Stock buybacks at Big Tech companies are falling by the wayside as free cash flow gets plowed into AI infrastructure investments.
A new note from Goldman Sachs strategist Ben Snider shows analysts now expect megacap US hyperscalers to allocate $755 billion to capital expenditures in 2026, an 83% year-over-year jump. This spending is estimated to reach 100% of cash flows from operations this year, leaving little room to return cash to shareholders without a drawdown of cash balances or a large increase in debt.
Accordingly, the hyperscalers cut buybacks by 64% year over year in the first quarter and now allocate 20% of total spending to buybacks and dividends, compared to an average of 34% from 2017 to 2022.
A look below the hood: Snider forecasts S&P 500 (^GSPC) capital expenditures of $2 trillion, up 33% from last year, and buybacks of $1 trillion, up 3%.
Snider added, “Our estimates show companies allocating roughly 55% of cash spending to capex and R&D and 35% to buybacks and dividends, compared with the 10-year averages of 43% and 46% … In 2027, we expect a slowing pace of hyperscaler capex growth to cause a deceleration in aggregate S&P 500 capex spending, while hyperscaler and broad S&P 500 buyback growth will likely remain minimal.”
The AI spending bonanza: The AI capital expenditure boom has reached a fever pitch in 2026, with the hyperscalers revising their spending upward.
Microsoft (MSFT) led the charge, raising its 2026 capital expenditures outlook to a staggering $190 billion — a potential 130% year-over-year increase.
Amazon (AMZN) boosted its planned spending to $200 billion to accelerate data center construction and robotics automation.
Alphabet (GOOG, GOOGL) and Meta (META) raised their targets to ranges of $180 billion to $190 billion and $125 billion to $145 billion, respectively, driven by the need to scale generative AI models.
These aggressive upward revisions reflect a strategic shift where AI infrastructure is now treated as a core utility, even as investors debate whether the massive outlays will generate immediate returns.
Bottom line: Even Big Tech companies with seemingly endless amounts of cash have their limits, and we are seeing that now when comparing their spending on buybacks and AI infrastructure.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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