Live Markets: Surging hyperscaler capex sparks share buyback shift

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    SURGING HYPERSCALER CAPEX SPARKS SHARE BUYBACK SHIFT 
  

        
  
Share repurchases are often a significant contributor to shareholder returns, particularly in markets like the U.S. where the amount spent on buybacks often exceeds dividends. 
But huge capital expenditure plans in the U.S., in part due to the AI data centre build out, have raised concerns about whether buybacks could be crowded out, according to Deutsche Bank. 
Capex is indeed surging, mainly driven by a narrow group of big hyperscalers. 
Five of those - Amazon  AMZN.O, Microsoft  MSFT.O, Alphabet  GOOGL.O, Meta  META.O and Oracle  ORCL.N - are responsible for two-thirds of the increase in capex over the last two years, DB notes.
"In turn, they have slashed their buybacks from a run-rate of around $30 billion a quarter to essentially zero," DB says.
But, offsetting that, companies whose earnings directly benefit from the capex are raising their buybacks, as are the rest of the S&P 500 .SPX. 
"S&P 500 buybacks rose to a record $300 billion in Q1 ($1.2 trillion annualized) on a gross basis and to a record $270 billion on a net basis," writes DB. 
"Earnings are the most important driver of buybacks, and record buybacks have kept pace with record earnings."
(Samuel Indyk)
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