Goldman Sachs Report Describes Shift From Labor Costs and Buybacks to AI Capital Spending

Goldman Sachs global strategy team stated that corporate capital allocation patterns have changed since 2022. The shift follows decades in which companies kept labor costs low and used low interest rates to repurchase shares.

In the pre-1980 traditional cycle, high inflation and volatile returns led investors to seek high dividend yields. From 1982 through the pandemic, the modern cycle featured falling labor shares of national income, globalization, and rising corporate profit margins.

After the 2008 financial crisis, companies borrowed at low rates to fund stock buybacks rather than new investment. Equity returns rose while inflation-adjusted wages remained largely flat. Technology companies recorded particularly large gains from share repurchases.

Sachs analysts wrote that capital expenditure growth has overtaken buyback growth. S&P 500 companies reported 38 percent year-over-year capex growth in the first quarter of 2026, compared with 1 percent growth in buybacks. The top five hyperscalers are projected to spend 755 billion dollars on capital projects in 2026.

The spending targets data centers, semiconductor facilities, power grids, and fiber networks needed for artificial intelligence. Goldman Sachs named ASML, Lam Research, Schneider Electric, Broadcom, and Vistra among companies positioned to benefit. The report noted that equity ownership remains concentrated, with the top 1 percent of Americans holding 50 percent of corporate stock and mutual funds.