US Stock Buyback Boom Fades, Signaling New Market Warning

According to the latest research from Ned Davis Research (NDR), the wave of stock buybacks that has swept through the US equity market over the past year is beginning to subside, potentially signaling a turning point for the market.

The report indicates that stock buyback activity among S&P 500 companies, after peaking in 2025, began to decline in the first quarter of 2026. This reflects signs that some companies' financial health may no longer be as robust as in previous years.

While the overall buyback volume for the S&P 500 remains near historical highs—exceeding $1 trillion in net buybacks each quarter in 2025—it has now fallen below the $1 trillion mark in Q1 2026. Notably, the communications sector saw a sharp drop, with buyback amounts falling from a peak of $230 billion to approximately $186 billion. Tech sector buybacks have also stagnated, declining from over $260 billion to $250 billion.

One key reason for the weakening buyback momentum is the massive capital expenditure (Capex) in artificial intelligence (AI). Goldman Sachs notes that tech giants are redirecting funds previously used for share buybacks toward capital investments to maintain AI competitiveness. The top four AI spenders—Alphabet (GOOGL-US), Meta (META-US), Microsoft (MSFT-US), and Amazon (AMZN-US)—are expected to see their capital spending grow by 77% this year.

Adding to market concerns is the growing reliance on debt to fund these high expenditures. Analysis shows that the top five tech giants, including Oracle (ORCL-US), have seen the proportion of new annual debt to capital expenditure surge from 9% in 2024 to 32%. FactSet even forecasts that Amazon, Meta, and Oracle could see their free cash flow approach zero or turn negative in the current fiscal year.

Therefore, while aggregate data may appear stable, the declining buyback capacity of individual firms masks underlying financial risks. With AI investment payback periods still unclear and corporate leverage rising, market volatility could intensify further.