JPMorgan strategists foresee a substantial increase in U.S. share repurchases, projecting an additional $600 billion, while Goldman Sachs analysts express reservations, citing rising interest rates and increased capital expenditure on AI infrastructure. This divergence highlights uncertainty around a key market driver.

Divergent Forecasts on Share Repurchase Activity

The landscape of U.S. equity markets is currently marked by a significant debate surrounding the future trajectory of corporate share buybacks. While JPMorgan Chase & Co. strategists anticipate a robust expansion, potentially adding another $600 billion to the existing record pace, analysts at Goldman Sachs Group Inc. present a more cautious outlook, highlighting macroeconomic headwinds and shifting corporate priorities.

The Event in Detail: A Tale of Two Outlooks

JPMorgan’s analysis, led by Nikolaos Panigirtzoglou, suggests that U.S. share repurchases are poised for substantial growth. The firm projects an increase from the current $1.5 trillion annual pace, forecasting an additional $600 billion in buybacks in the coming years. This optimism stems from historical comparisons, noting that current buyback volumes, at 2.6% of market capitalization, remain below the pre-pandemic range of 3-4%. Globally, corporate buybacks have already matched last year's total of $1.37 trillion in the first eight months of 2025, pointing towards a new record of $1.9 trillion for the full year.

Conversely, Goldman Sachs strategists, including Ben Snider, express skepticism regarding such an aggressive expansion. Their research indicates that rising interest rates and a significant uptick in capital expenditure (CapEx), particularly within the burgeoning field of AI infrastructure, could curtail future buyback activity. The firm notes that the "Magnificent Seven" tech giants, including Nvidia Corp. (NVDA), Microsoft Corp., Apple Inc. (AAPL), Alphabet Inc. (GOOGL), Amazon.com Inc., Meta Platforms Inc., and Tesla Inc. (TSLA), have diverted substantial funds towards building AI data centers. This shift is reflected in the S&P 500 companies, which reported 24% year-over-year CapEx growth in the second quarter of 2025, contrasting with a 1% decline in gross buybacks during the same period. Goldman Sachs projects S&P 500 buybacks to rise by 12% to $1.2 trillion next year, but emphasizes that this growth could be constrained if AI-related capital spending remains elevated.

Analysis of Market Reaction: Implications for Equity Valuations

The divergence in these forecasts carries significant implications for equity market performance. Historically, share buybacks have served as a powerful catalyst for stock appreciation by reducing the outstanding share count, thereby inflating earnings per share (EPS) and enhancing valuation ratios like the Price-to-Earnings (P/E) ratio. A sustained increase in buybacks, as predicted by JPMorgan, could act as a strong tailwind, particularly for large-cap stocks, by creating a consistent demand for shares and boosting investor returns. This mechanism has contributed to the S&P 500's trailing P/E ratio benefiting from a 13.7% reduction in share counts across 13.7% of its constituents in Q1 2025.

However, a stagnation or decline in buyback activity, as suggested by Goldman Sachs, could remove a key support for equity valuations. In an environment of elevated interest rates, companies face higher borrowing costs, potentially making debt-funded buybacks less attractive. Coupled with increased strategic investments in areas like AI, companies may prioritize long-term growth over immediate shareholder returns via repurchases.

Broader Context and Implications

U.S. corporate buyback activity has reached unprecedented levels in recent years. Companies spent over $942.5 billion on share repurchases in 2024, an 18.5% increase from 2023, marking a record high since the $1.005 trillion peak in 2022. The first quarter of 2025 alone saw S&P 500 companies execute $293.5 billion in buybacks, with the top 20 companies accounting for 48.4% of this total.

Technology and Financials have emerged as the dominant sectors driving this trend. Major individual contributions include Apple's $100 billion buyback program, which reduced its share count by over 4%, Alphabet's $70 billion announcement, and NVIDIA's accelerated repurchases, increasing from $25 billion in 2023 to $60 billion. Financial giants like JPMorgan Chase (with a $50 billion authorization) and Goldman Sachs (which repurchased 18.1% of its market value with $40 billion in buybacks) also feature prominently.

While buybacks bolster short-term EPS, a critical debate revolves around their impact on long-term investment. Concerns have been raised that extensive repurchases may crowd out investments in research and development (R&D) and other capital expenditures, potentially hindering innovation and future growth. This trade-off is becoming increasingly relevant as companies allocate significant resources to transformative technologies like AI.

Expert Commentary

JPMorgan strategist Nikolaos Panigirtzoglou highlighted the growth potential, stating:

"Historical comparisons suggest U.S. share buyback volumes have further room to increase over the coming years towards the 3%-4% of equity market cap range seen before the pandemic."

In contrast, Goldman Sachs' Ben Snider pointed to the competitive demands on corporate capital:

"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."

Looking Ahead

The trajectory of corporate share buybacks will remain a critical factor influencing equity market performance in the coming quarters. Key elements to monitor include the sustainability of AI-related capital expenditures and their potential to continue constraining buyback growth. Furthermore, the prevailing interest rate environment will dictate the attractiveness and feasibility of debt-funded repurchases.

Regulatory developments, such as the existing 1% excise tax on net buybacks (which reduced S&P 500 earnings by 0.5% in Q1 2025) and any potential increases to this tax, could also compel companies to re-evaluate their capital allocation strategies, potentially shifting focus from buybacks towards dividends or growth projects. Investors will closely watch how corporations balance immediate shareholder returns with long-term strategic investments in an evolving economic and technological landscape.