Is The Surge In Capex Crowding Out Buybacks

Despite concerns that surging capex among hyperscalers would crowd out share buybacks, S&P 500 net buybacks reached record highs in Q1. The broader market remains resilient, driven by robust earnings growth.

Key Takeaways

• 1.The surge in capital expenditure is concentrated among a narrow group of five 'hyperscalers' who have slashed buybacks.
• 2.Direct beneficiaries of hyperscaler capex and the rest of the S&P 500 are increasing net buybacks, pushing total S&P 500 net buybacks to record levels.
• 3.While the IPO issuance wave may act as a technical drag on returns in isolation, these waves historically occur alongside strong market demand and equity returns.

Table of Contents

• From concerns about not enough capex to there being too much of it
• Capex is clearly surging but has been driven by a narrow group of big spenders
• who are indeed slashing buybacks as well as raising additional capital
• But companies that benefit directly from hyperscaler capex are raising their buybacks
• as is the rest of the S&P 500 which accounts for the bulk of earnings and buybacks
• driving net buybacks for the S&P 500 to a record in Q1
• What about the massive IPO issuance wave?

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