Post by Augustine Chiagozie (@pabloexchange)

💸 AI has turned stock buybacks into a bad signal

For years, U.S. companies spent trillions buying back their own shares. It boosted earnings, supported stock prices, and often signaled there were few attractive places left to invest.

That logic is being reversed.

Google recently announced an $85 billion equity raise, effectively wiping out more than two years of buybacks. Meta is reportedly considering a stock sale as well. The goal is simple: raise capital and deploy it into AI infrastructure.
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Today's market is rewarding spending, not financial engineering.

Companies building data centers, buying chips, and expanding AI capacity are outperforming those focused on buybacks. According to Goldman Sachs, firms with elevated capital expenditures are beating companies with the highest buyback yields by roughly 30%, the largest gap on record.
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The shift is already visible in corporate financials. Across the market, free cash flow has fallen from roughly 90% of net income to about 75%, as companies spend more on AI infrastructure.
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The message from investors is clear.

Raise debt. Raise equity. Build capacity.

In the AI era, capital expenditure has become the new growth signal.

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