In a significant shift in corporate priorities, U.S. companies are increasingly diverting capital from traditional shareholder payouts like dividends and buybacks to fund artificial intelligence (AI) innovation. This trend reflects a growing recognition among investors that long-term growth, driven by AI, is more critical than immediate profits. Goldman Sachs has revised its forecast for U.S. share buyback growth down to 9% from 12%, anticipating that AI-driven investments will dominate corporate spending well into 2026.
Capital expenditure plans by S&P 500 companies have surged to a record $1.2 trillion in 2025, the highest since Trivariate Research began tracking the data in 1999. The top nine companies alone account for nearly 30% of this spending. Despite record shareholder returns of $1.65 trillion in the 12 months ending June 2025, including $653.86 billion in dividends and $997.82 billion in buybacks, investors are prioritizing companies with robust AI strategies.
Tech giants like Alphabet, Meta, Microsoft, and Oracle have seen double-digit stock price gains this year, outpacing broader market performance. In contrast, Apple, despite leading in capital returns, has lagged due to concerns over its AI innovation efforts. The AI investment wave is not limited to Silicon Valley, with sectors such as banking, healthcare, and consumer staples also embracing the technology. JPMorgan Chase, for instance, is investing $2 billion annually in AI development, while companies like Northrop Grumman and Lockheed Martin are integrating AI into defense systems.
While analysts remain cautious about labeling the current AI boom a bubble, many warn that the trend could face challenges as companies increasingly rely on debt and complex deal-making. Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, predicts that by the second half of 2026, investors may begin questioning whether the promise of AI is fully priced into the market.