This sleeper AI risk for stocks in 2026 has got Wall Street talking over the past few weeks

By Joseph Adinolfi

A slowdown in corporate buybacks as AI players pile on debt could steal an important source of demand from the market

Some are worried that Big Tech could ease up on corporate buybacks next year as these companies plow more money into the data-center arms race.

Corporations buying back their own shares have gotten some of the credit for fueling the stock market's record-setting comeback from the April tariff tantrum.

Now, some on Wall Street are starting to worry that big companies in the U.S. might not be as aggressive in 2026. This could impede a three-year bull market that has carried major indexes like the S&P 500 SPX to record highs.

Over the past couple of days, a cross-asset strategist at Nomura and a managing director at Mizuho Securities in New York have flagged risks tied to a potential slowdown in buybacks in commentary shared with MarketWatch.

Charlie McElligott, a cross-asset strategist at Nomura, raised the possibility that the so-called hyperscalers - a group of companies commonly known to include Microsoft Corp., MSFT Alphabet Inc., GOOG GOOGL Meta Platforms Inc. META and Amazon.com Inc. AMZN and Oracle Corp. ORCL- could see their plans for borrowing massive sums to finance the ongoing data-center build-out start to eat into their free cash flows.

That, in turn, would leave less money available to buy back their own shares. McElligott pointed out that AI-related firms have already seen a decline in share buybacks authorized in 2025, compared with 2024. Companies that authorize buybacks can start buying their shares more or less immediately, although many parcel out their purchases over the course of a year or more, said Winston Chua, a liquidity analyst at EPFR, part of ISI Markets.

Even as the big AI winners have pulled back, the value of stock buybacks announced by publicly traded firms in the U.S. was on track to hit the highest level ever recorded during a calendar year, Chua said. So far, companies have announced plans to purchase nearly $1.3 trillion worth of their own shares, EPFR data showed. That figure is likely to grow before the end of the year, Chua said. Last December, EPFR counted $120 billion in newly authorized buybacks.

The only member of the clique of hyperscalers to authorize new buybacks this year has been Alphabet, which said back in April that it would purchase up to $70 billion.

Apple Inc. (AAPL) has authorized $100 billion in buybacks, the biggest of any U.S. firm in 2025.

Companies typically announce a dollar figure when they authorize buybacks, Chua said. Some announce share totals, but that is less common.

The question of whether a lapse in buybacks could hurt stocks next year has been coming up in conversations with clients and Wall Street peers alike over the past few weeks, said Daniel O'Regan, a managing director on the institutional equity trading desk at Mizuho Securities.

On any given day, O'Regan said corporate buybacks can account for between 3% and 10% of market volume. O'Regan added that he doesn't see a slowdown in corporate buying as a major risk for stocks. But it could have an impact around the margins.

"Do I think it's a massive negative? No. But is it one thing people are talking about? Yes," O'Regan said during an interview with MarketWatch.

McElligott seemed to think fewer buybacks could have a bigger impact. In commentary shared with MarketWatch earlier this week, he rattled off a few other potential risks. One of the big ones was that the Federal Reserve could leave investors disappointed by delivering fewer interest-rate cuts than many expect.

Read: As Amazon raises $15 billion in a bond deal, investors worry about companies taking on too much AI debt

U.S. stocks finished higher on Wednesday, with the S&P 500 SPX and Dow Jones Industrial Average DJIA snapping a four-day losing streak. U.S. stocks were set to open higher on Thursday after strong results from Nvidia Corp. (NVDA), which confirmed that it spent $12.46 billion buying back its own shares during the most recent quarter.

-Joseph Adinolfi

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11-20-25 0813ET