Goldman Sachs Bullish on S&P 500 Hitting 8,000! U.S. Equities Face Record Issuance Wave, but 'Demand Will Outstrip Supply'

As the S&P 500 repeatedly hits new highs, U.S. equities are experiencing the largest stock issuance wave in history, with an estimated $700 billion in issuance by 2026. Despite rising corporate fundraising needs fueled by AI capital expenditures, Goldman Sachs believes share buybacks could reach $1.4 trillion, sufficient to absorb new supply and push the S&P 500 toward 8,000.

The S&P 500 closed at 7,757 on Friday (7th), setting a new all-time high. This marks the 26th record high of the year and the 122nd since the beginning of 2024.

Despite ongoing concerns about geopolitical risks, high interest rates, and potential AI bubbles, the index continues to climb, prompting investor worries about whether the market can withstand the largest-ever equity issuance wave.

In response, John Flood, Head of Americas Equity Execution Services and Partner at Goldman Sachs, stated: 'Yes, and the S&P 500 could even challenge the 8,000-point level.'

Goldman Sachs estimates that total U.S. equity issuance in 2026 will reach approximately $700 billion, a record high. IPOs will contribute over $225 billion, while follow-on offerings, convertible bonds, and SPACs will account for about $450 billion.

However, when measured against the total market capitalization of the Russell 3000 index, the issuance ratio is only about 1%, similar to the historical average from 2015 to 2019.

Notably, U.S. companies raised a combined $252 billion in Q2 2024 through IPOs, follow-ons, convertibles, and SPACs—surpassing the previous quarterly record of $234 billion set in Q1 2021.

Follow-on offerings alone contributed $70 billion in Q2, with a year-to-date total of $105 billion by the end of July—highest for the period since 2021.

Flood argues that when considering issuance size relative to market cap and the number of deals, this surge 'resembles a return to normal rather than true overheating,' as both metrics remain slightly below long-term averages.

Buybacks: The Real Market Support

Despite high issuance, analysts believe the market may be underestimating the resilience of corporate buybacks.

S&P 500 constituents saw an 11% year-on-year increase in buyback value in Q2. While some mega-cap tech giants are shifting cash flow from buybacks to capital expenditures, sectors like banking and semiconductors are increasing their buyback activity.

To date, U.S. companies have authorized $989 billion in buybacks in 2024, already a record high.

Goldman Sachs projects full-year open-market buybacks could reach $1.4 trillion—enough not only to absorb the $700 billion in primary market issuance but also to offset potential selling pressure from IPO lockup expirations.

Goldman’s analysis shows that even if all unlocked shares were sold simultaneously, market demand would still outweigh supply.

AI Capital Spending: The True Driver of the Issuance Surge

A closer look at issuance structure reveals that 2024’s equity issuance is highly concentrated in a few large deals. The top three issuance events account for nearly half of the year-to-date total.

By sector, AI-related firms contributed about 40% of U.S. follow-on issuance. The technology, media, and telecom (TMT) sector accounted for nearly 30% of follow-on issuance—more than double the five-year average. Healthcare remains the largest single sector by issuance volume, as usual.

The underlying driver, analysts say, is funding demand for AI infrastructure investment.

Goldman cites a widely held market view that mega-cap tech firms’ capital expenditures will exceed $1 trillion annually over the next few years, potentially surpassing their operating cash flows as early as 2027.

Recent investor engagements by Goldman reveal that most equity investors expect mega-cap tech capital spending to exceed consensus, with other firms also ramping up fundraising to keep pace with AI investment.

Notably, in response to the massive capital expenditure gap, companies are prioritizing debt financing.

Goldman’s credit strategy team estimates that about 35% of mega-cap tech firms’ 2027 capital spending will be funded via bond issuance—translating to about $400 billion in global bond issuance. Other AI infrastructure players are expected to follow suit.

In contrast, equity financing plays a more supportive role. For some firms, modest equity issuance helps support multi-year investment plans while maintaining balance sheet health and avoiding overreliance on bond markets and issuance capacity constraints.

Goldman’s Conclusion: Issuance Is a Headwind, Not a Storm

Goldman’s Chief U.S. Equity Strategist concludes that the equity issuance wave is a 'manageable headwind, not a storm capable of overturning the market.'

The rise in follow-on issuance is driven by AI-related funding needs, which are expected to persist. However, issuance is highly concentrated, the issuance-to-market-cap ratio remains below long-term averages, and pricing discounts and post-announcement stock performance show no signs of market digestion issues.

In terms of funding sources, debt will cover the majority of external financing gaps for mega-cap tech and AI infrastructure investment, while the projected $1.4 trillion in buybacks will far exceed the combined total of $700 billion in primary issuance and potential unlocked supply.

As Flood puts it: 'In 2026, corporate equity demand will continue to outstrip supply.'