"One unexpected side effect of the Magnificent 7's race to build massive AI data centers-and source the power needed to run them-is that they are reducing share buybacks to fund them, according to Goldman Sachs. Companies routinely buy back their own shares to incentivize investors for holding them, to reduce the number of shares available (thus boosting earnings per share), and to boost their own stock prices."
"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."
S&P 500 buyback growth that normally increases about 20% annually stalled in Q2 2025 as companies shifted funding into AI capital expenditure. S&P 500 buybacks totaled nearly $550 billion in 1H 2025 ($490 billion net of equity issuance) but were flat year-over-year in Q2. The Magnificent 7 account for roughly 30% of gross S&P 500 buyback spending and posted 0% year/year buyback growth during the quarter. Hyperscalers ramped AI-related capex, spending roughly $368 billion so far this year, while AI-driven capex jumped about 24%, diverting funds from buybacks.
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