Editor's note: Buybacks are becoming a shared capital flow signal for both US equities and the crypto market. In crypto, some projects use protocol revenue to repurchase tokens. From Hyperliquid using protocol fees to buy HYPE, to Pump.fun allocating part of its platform revenue to repurchase PUMP, the crypto market is increasingly linking "how much a project earns" with "how that revenue supports token value." Buybacks have thus become a capital flow signal for observing project fundamentals: can business revenue generate sustained buying pressure, and can it offset the selling pressure from token unlocks?

Related reading: "Crypto's 'Fundamentals Era' Has Arrived: Buybacks, Cash Flow, and Three Valuation Logics"

US equities face a similar question. Major cloud service providers are continuously increasing AI capital expenditure, and the market worries that the more money spent on building data centers and buying chips, the less funding is left for stock buybacks. But this Goldman Sachs market commentary points out that buyback growth among AI infrastructure companies has already exceeded the decline in buybacks by cloud service providers. The main force behind buybacks is shifting, and overall corporate buying remains in expansion.

Stock and token buyback mechanisms differ, but tracking where the money goes is equally important: who is making money, who is expanding investment, and who is continuously buying back their own stocks or tokens? These specific capital arrangements are becoming an important basis for judging asset value.

The following is the original text:

TL;DR

· AI capital expenditure is changing the source of US equity buybacks, and the decline in cloud service provider buybacks has not yet led to an overall contraction in corporate buying.

· Buyback growth among AI infrastructure companies has exceeded the decline in cloud service provider buybacks, and capital arrangements at different links in the industrial chain need to be observed separately.

· Goldman Sachs expects US corporate buybacks to rise from $1.5 trillion in 2026 to $1.7 trillion in 2027, and corporates remain an important support for its bullish view on US equities.

· An increase in buyback authorizations reflects that companies retain room to return capital, but how much buying actually materializes still depends on execution scale and pace.

· Investor sentiment is weak and hedge fund net exposure is low, leaving room for subsequent increases in holdings, but catalysts such as earnings are needed to drive it.

· The original text's judgment that the S&P 500 will break above 8,000 points is based on the joint improvement of buybacks, earnings, and positioning, and cannot be realized by capital flows alone.

AI investment squeezes cloud providers' buybacks, infrastructure companies are stepping in

For U.S. equity fund flows, the market typically focuses on funds, retail investors, and overseas investors. But Goldman Sachs points out that American companies themselves have consistently been the most stable buyers of U.S. stocks, and that demand is still accelerating.

Companies buying back their own shares is an important source of this demand. When companies allocate more cash toward expanding data centers, purchasing chips, and other infrastructure, investors naturally worry that the funds left for shareholders will shrink accordingly.

This concern is already evident among large cloud service providers. Goldman Sachs notes that buybacks by hyperscale cloud service providers have declined, but strong buyback growth at AI infrastructure companies has more than offset that decline.

Therefore, to assess the impact of AI investment on U.S. equity buying, one needs to observe both the side spending on construction and the side supplying infrastructure to it.

Cloud service providers increasing investment and some infrastructure companies expanding buybacks can occur simultaneously. However, infrastructure companies expanding buybacks does not mean that all AI spending will translate into supplier profits or buybacks.

Nvidia is one example. On September 28, the company announced an additional $150 billion buyback authorization, bringing its total remaining authorization to $235 billion, and said it expects to execute the remaining plan before the end of fiscal year 2028.

Two concepts need to be distinguished here: a buyback authorization is the amount the board permits the company to purchase, while actual buybacks are transactions that have already been executed. The $235 billion cannot be understood as funds that have already entered the market, nor can it all be counted as actual buybacks in any single year.

Buybacks projected to reach $1.7 trillion in 2027, corporate buying still expanding

The growth in corporate buybacks is already reflected in both actual execution and new authorizations.

In the first half of 2026, total buybacks by S&P 500 constituents rose 15% year-over-year; from the start of the year through Goldman Sachs' reporting date, U.S. stock buyback authorizations reached approximately $1.1 trillion, more than 20% higher than the same period last year.

The former metric records buybacks that have already occurred, while the latter reflects potential future execution capacity. The two cannot be added together or substituted for each other, but together they form the basis for Goldman Sachs' judgment that corporate buying remains strong.

Goldman Sachs expects total U.S. corporate buybacks to reach $1.5 trillion in 2026 and further increase to $1.7 trillion in 2027, a gain of approximately 13%. These two full-year figures are forecasts, and the 2026 data does not represent the scale of buybacks already completed to date.

Beyond buybacks, Goldman Sachs believes that growth in cash M&A will also increase corporate demand for equities. Buybacks typically mean companies purchasing their own shares; cash M&A pays cash to shareholders of acquired companies through acquisition transactions. Both are related to corporate capital, but cash M&A does not equate to an equivalent amount of immediate secondary-market buying.

Amid the AI investment boom, the corporate sector still has the capacity to expand equity demand. For the market, this means that even if other investors remain cautious, corporations themselves may still provide sustained funding support.

Weak sentiment, low net exposure — adding positions requires a catalyst

Corporate buying is strong, yet investor positioning remains cautious. This contrast forms another basis for Goldman Sachs MarketFeed commentary's bullish view on US equities.

Goldman Sachs' US equity sentiment indicator is in clearly negative territory, reflecting weak investor positioning sentiment as measured by the gauge. Meanwhile, the latest data from Goldman Sachs Prime Brokerage (PB) shows that hedge fund net exposure is low.

Net exposure can be roughly understood as long exposure minus short exposure, used to observe funds' overall directional bias toward the market. Low net exposure means funds' directional bets on upside are relatively limited.

But this does not mean fund trading is inactive, or that leverage usage is very low. When both long and short positions are large, net exposure can still be low, so low net exposure cannot be directly equated with hedge funds broadly running light positions.

This positioning state leaves room for subsequent additions: if companies continue buybacks and earnings can support share prices, currently cautious investors may re-increase equity exposure, providing additional demand for the market.

Weak sentiment can leave room for adding positions, but cannot alone trigger position additions. If earnings fall short of expectations, cautious positioning may also persist. Therefore, positioning data here provides potential conditions; the real trigger still depends on earnings and market performance.

The key to the 8,000-point call remains whether earnings can deliver

Goldman Sachs MarketFeed commentary argues that strong corporate demand, sluggish investor sentiment, low hedge fund net exposure, possible mega IPOs, and a new earnings season together constitute the conditions for the S&P 500 to soon break through 8,000 points.

Among these, earnings are the most direct test.

Bottom-up analyst consensus estimates show that S&P 500 earnings per share (EPS) for the third quarter of 2026 is expected to grow 27% year-over-year. This figure aggregates analysts' earnings forecasts for constituent companies and represents expectations before earnings are released, not already-realized profit growth.

A potential mega IPO could also spur retail investor participation. However, the specific offering size and listing timing remain unclear, and this factor remains a possible sentiment catalyst rather than a confirmed source of incremental buying.

As earnings season begins, corporate profits are expected to draw more attention, and market pricing focus may shift temporarily toward corporate performance; interest rates, inflation and other macro variables will still influence valuations.

The structure of corporate buying is changing: reduced buybacks by cloud service providers have not led to a simultaneous decline in equity demand across the entire corporate sector, as AI infrastructure companies are stepping in to fill the gap.

This provides support for U.S. stocks. Whether that support can translate into further gains depends on the actual execution of buyback authorizations, the realization of earnings expectations, and whether cautious investors are willing to add exposure again.

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