Firing on All Cylinders: What Broad-Based Inflation Means for Portfolios
READ TIME: 2 MIN | Inflation pressures are expanding beyond a handful of categories. Our Multi-Strategy team explains what broad-based inflation could mean for portfolios.
Off the desk | Equity | June 2026
Funding the AI Build: How Big Tech's Debt Is Quietly Rewiring Market Cycles
READ TIME: 2 MIN | For years, mega-cap tech buybacks helped support equity markets. Our Equity team examines how rising AI investment could reshape market leadership and future returns.
For much of the post-pandemic era, one structural force quietly underpinned equity markets: the relentless buyback machine of the largest technology companies in the world. The Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia) collectively executed roughly USD $280 to $310 USD billion in share repurchases during 2023 and 2024 alone, representing approximately 30 to 35% of the entire S&P 500’s annual buyback total of roughly USD $1.1 trillion. These were not debt-funded programs. They were self-financed out of prodigious free cash flow, with balance sheets still accumulating cash even as buyback programs grew at a double-digit pace. Since 2020, S&P 500 buybacks doubled from approximately $520 billion to their current pace, retiring roughly 2% of market capitalization annually. For equity allocations, this was not a footnote, it was the single largest non-economic bid under the index.
This bid is decelerating relative to the size of the market. In the first quarter of 2026, S&P 500 buybacks grew just 1% year over year, a sharp break from the multi-year double-digit trend, even as mega-cap technology companies reported revenue growth of 20% and earnings growth of approximately 60%. The issue lies beneath those headline numbers: a record one-third of that profit came from "other income" and private equity marks, not operating free cash flow. Real cash generation is lagging the optical earnings story, and capital expenditure budgets are consuming an increasing share of what remains. We believe that full-year 2026 capex for the S&P 500 is forecasted to grow approximately 33% to USD $2 trillion, with hyperscaler spending alone reaching an estimated USD $750 billion - an 80% year-over-year increase. Buybacks, by contrast, are forecasted to grow just 3% to USD $1 trillion. The capex bill has doubled. The buyback pool has been rebased lower.
To bridge this gap, the largest technology platforms have quietly shifted from being net capital returners to structural issuers of investment grade debt. Year-to-date 2026, investment grade issuance from hyperscalers has already reached USD $150 billion, matching the low end of the full-year buyside expectation with more than seven months remaining. The 2027 base case exceeds USD $200 billion. Companies that once defined the buyback era are now competing in credit markets for capital. The implications for investment grade spreads, credit supply dynamics, and ultimately the equity risk premium deserve attention.
The path forward divides into two scenarios that carry very different implications. In the constructive case, AI revenue and return on invested capital catch up to the pace of capex, debt-funded buildouts continue, and buybacks resume their growth trajectory in 2027 and 2028 from a higher and more diversified earnings base. In the more challenging scenario, AI revenue lags and free cash flow compression, combined with rising investment grade spreads, forces companies into a prolonged period of sustained buyback cuts. Under that outcome, the single largest non-economic support beneath the index is progressively withdrawn, and equity multiples that have been implicitly dependent on that bid face a possible re-rating risk.
Is mega-cap tech's earnings quality sufficient to justify current premiums, or are reported profits masking a free cash flow shortfall the market is willing to underwrite only until the AI capex-to-free cash flow inflection arrive? And what happens to multiples if it's pushed to the right or underwhelms? As hyperscalers transition from equity-friendly capital returners to credit market issuers, which parts of a client's equity allocation are most exposed to the potential loss of that buyback bid? Concentration cuts both ways.
All data sourced from Picton Mahoney Asset Management Research and Bloomberg Inc. as of May 12, 2026, unless otherwise cited.
READ TIME: 2 MIN | Inflation pressures are expanding beyond a handful of categories. Our Multi-Strategy team explains what broad-based inflation could mean for portfolios.
READ TIME: 3 MIN | Many investors have linked rising bond yields to energy prices. Our Fixed Income team explores the broader forces that may be keeping rates elevated.
READ TIME: 3 MIN | M&A activity, SPAC issuance, and convertible markets continue to create opportunities. Our Arbitrage team highlights the value of alternative return sources.
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