The corporate world’s artificial intelligence (AI) arms race is reshaping balance sheets, and investors are starting to feel the ripple effects. According to a new analysis from Goldman Sachs, companies across sectors are spending so aggressively on AI infrastructure, talent, and acquisitions that they are pulling back from one of Wall Street’s favorite shareholder rewards: stock buybacks.
From Buybacks to Big Tech Bets
For more than a decade, share repurchase programs have been a central feature of corporate America’s capital allocation strategy. Buybacks reduce the number of shares on the market, often boosting earnings per share and supporting stock prices.
But Goldman’s report shows a clear trend: AI is absorbing the cash once funneled into buybacks. Companies eager to capture market share in this transformative technology are directing billions toward data centers, chips, software integration, and research labs instead of returning that money to investors. 
“We’re seeing a rotation from financial engineering to innovation spending,” said David Kostin, Goldman’s chief U.S. equity strategist. “This is most visible in technology and communications, but it’s spreading quickly across industries.”
The AI Gold Rush
Nowhere is this shift clearer than in the massive capital expenditures on AI infrastructure. Microsoft, Amazon, Google, and Meta have already earmarked tens of billions of dollars to expand cloud computing and deploy generative AI. Nvidia’s chips, central to training large AI models, are being snapped up at unprecedented rates.
But AI investment isn’t limited to Silicon Valley. Banks are spending heavily on AI-powered risk assessment tools, healthcare firms are adopting AI for drug discovery, and industrial giants are building AI-enhanced supply chains. The result: corporate budgets are being reoriented toward long-term innovation rather than short-term shareholder payouts.
Why Buybacks Are Taking the Hit
Goldman notes that while dividends remain relatively stable, buybacks are more flexible and therefore easier to cutwhen companies need to reallocate resources. With AI requiring continuous and escalating investment, firms see reducing buybacks as the path of least resistance.
In 2023 alone, S&P 500 companies spent roughly $795 billion on buybacks—down from over $930 billion the previous year. Analysts expect that number to fall again in 2025 as AI spending accelerates.
Investor Sentiment: Mixed Signals
Investors are divided on whether this trend is positive or negative. On one hand, cutting buybacks can be seen as a drag on near-term shareholder returns. On the other, AI is viewed as a generational investment opportunity, with Goldman predicting it could add as much as $7 trillion to global GDP over the next decade.
Many long-term investors are betting that shifting capital from financial engineering to innovation will unlock more sustainable growth. Still, some hedge funds that rely on buyback-driven stock support are recalibrating their strategies.
The Bigger Picture
The move highlights a broader shift in corporate priorities. For years, critics argued that excessive buybacks drained resources from innovation and left companies less resilient. The AI era is now reversing that trend, forcing executives to choose growth and competitiveness over short-term stock boosts.
“AI is the most disruptive investment theme of our time,” said Kostin. “Companies that fail to pivot risk being left behind. The trade-off is fewer buybacks today, but potentially much greater value creation tomorrow.”
What’s Next
As AI deployment ramps up, Goldman expects buyback activity to remain below pre-2023 levels in several sectors, particularly tech, communications, and financials. Meanwhile, industries slower to adopt AI—like utilities and consumer staples—may continue buyback programs as usual.
For investors, the key will be distinguishing between companies spending wisely on AI with clear strategies, versus those chasing hype.
The Bottom Line
The AI revolution is forcing companies to redefine how they use their cash. Shareholders may see fewer buybacks in the short term, but the bet is that reinvesting in AI will yield far greater rewards in the years ahead. For Wall Street, the message is clear: the era of easy stock support through buybacks is giving way to an era of heavy, high-stakes investment in the future of technology.
