Goldman Sachs targets S&P 8,000 as $1.4T buybacks offset issuance

The S&P 500 can reach 8,000 despite record $700 billion equity issuance, Goldman Sachs said, as $1.4 trillion in buybacks offsets supply.

"Yes. The S&P 500 can push to 8,000," John Flood, head of Americas equity execution services at Goldman Sachs, said.

U.S. corporations raised $252 billion in the second quarter through IPOs, follow-on offerings, convertibles and SPACs, breaking the Q1 2021 record of $234 billion. Full-year issuance is projected at about $700 billion — roughly 1 percent of the Russell 3000's market capitalization, in line with the 2015-2019 average. Follow-on issuance reached $105 billion year-to-date through July, the highest since 2021.

The supply overhang is manageable because buybacks are running at record levels. S&P 500 buyback authorizations reached $989 billion year-to-date, and Goldman projects $1.4 trillion in full-year repurchases — roughly double the projected primary issuance. AI-driven capital expenditure is the core driver of the issuance wave, with hyperscaler capex expected to exceed $1 trillion annually.

The S&P 500 closed at a record 7,757 on Friday, its 26th all-time high this year and the 122nd since early 2024, as the market climbed past concerns over geopolitical tensions, elevated interest rates and AI valuation debates.

Issuance is concentrated, not broad

The 2026 issuance wave is highly concentrated. The top three deals account for nearly half of year-to-date IPO and follow-on volume. AI-related issuance represents about 40 percent of U.S. follow-on supply, while technology, media and telecom companies account for nearly 30 percent of year-to-date follow-on volume — more than double the sector's five-year average share. Healthcare remains the largest contributor by sector.

Flood said that when measured against market size and deal count, the issuance wave "looks more like a return to normal than a boom," with both metrics slightly below historical averages. The second quarter's follow-on volume of $70 billion contributed to the year-to-date total of $105 billion through July.

Buybacks are the ballast

S&P 500 buybacks rose 11 percent year-over-year in the second quarter. While hyperscalers have redirected cash flow from buybacks to capital expenditure, banks and semiconductor companies are expanding repurchase programs.

Goldman estimates the $1.4 trillion in full-year buybacks would cover the roughly $700 billion in primary issuance and absorb potential supply from IPO lockup expirations, even if all unlocked shares were sold immediately. Year-to-date buyback authorizations of $989 billion already exceed the full-year totals of most prior years.

Debt carries the AI capex load

Most AI infrastructure investment will be financed with debt. Goldman's credit strategists expect hyperscalers to fund 35 percent of 2027 capital expenditure with debt, corresponding to about $400 billion in global bond issuance. Other AI infrastructure companies are also expected to raise additional financing. Consensus estimates project hyperscaler capital expenditure will exceed $1 trillion annually for the next several years, with capex surpassing 100 percent of operating cash flow by 2027.

Equity financing plays a secondary role, helping companies support multi-year investment plans while maintaining balance sheet quality and avoiding debt market capacity constraints. Goldman's recent conversations with investors indicate that most stock investors expect hyperscaler capital expenditure to exceed consensus estimates, with other companies also raising funds for AI investment plans.

Goldman's chief U.S. equity strategist described equity issuance as a "manageable headwind, not a market hurricane." Flood's assessment was more direct: "Corporate equity demand will continue to outpace supply in 2026." The forecast reflects the bank's conviction that equity demand remains structurally stronger than supply, even as AI-driven capital needs reshape corporate financing patterns.

This article is for informational purposes only and does not constitute investment advice.