Artificial intelligence (AI) is the fuel that's powering Wall Street's engine. The stock market's major indexes aren't hitting several record highs without AI lifting the long-term growth potential of Wall Street's most influential businesses.
Four hyperscalers -- Alphabet (GOOGL +3.61%)(GOOG +3.52%), Meta Platforms (META +4.39%), Microsoft (MSFT +2.28%), and Amazon (AMZN +3.83%) -- have collectively guided toward nearly $700 billion in capital expenditures in 2026 for their respective AI data center build-outs.
While growth rates and cash-rich balance sheets at these companies justify big-time investments in artificial intelligence, S&P 500 (^GSPC +1.18%) companies are being even more aggressive with another bottom-line-focused investment.
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Hyperscalers are breaking the bank to realize their AI ambitions
Before digging into the "Why?" behind these eye-popping investments in AI infrastructure, it's imperative to understand the "How?" The catalyst for all four of these hyperscalers is that they possess foundational cash cow operating segments that help facilitate sizable investments in higher-growth initiatives:
- Alphabet holds a virtual monopoly in internet search, with Google accounting for an approximate 90% share of search engine traffic, according to GlobalStats.
- Meta Platforms lured an average of 3.58 billion people to its family of apps daily in December. Having the most attractive social media destinations has led to exceptional ad-pricing power.
- Microsoft's legacy segments (Windows and Office) remain cash flow-generating machines, while Azure is second globally in cloud infrastructure services spending.
- Amazon is a dual-industry leader. Though most consumers know it's the top dog in online retail sales, Amazon Web Services (AWS) is ahead of Azure as the leading global cloud infrastructure services platform by total spend.
The cash flow these hyperscalers generate from their foundational operating segment(s), coupled with their already cash-rich balance sheets, is fueling their AI data center build-outs.
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Key Data Points
The results, thus far, have been promising. Alphabet's Google Cloud (the No. 3 cloud infrastructure services provider behind AWS and Azure) delivered 48% year-over-year sales growth in the fourth quarter. Microsoft's Azure and Amazon's AWS have also seen their revenue growth reaccelerate as generative AI and large language model capabilities have been integrated into their respective platforms.
Meanwhile, the incorporation of generative AI into Meta's advertising platforms has provided a lift to its ad-based sales growth.
Given the hoopla surrounding AI, along with its sky-high addressable market, you'd be under the impression that businesses aren't spending more on any other initiative. But there's another apple of S&P 500 companies' eyes that enticed them to spend over an estimated $1 trillion last year.
Image source: Getty Images.
S&P 500 companies are shelling out over $1 trillion to invest in themselves
Now-retired billionaire investor Warren Buffett once said, "The best investment you can make is in yourself." While hyperscalers building out their AI data center infrastructure is an investment in the future, there's no investment more direct than public companies repurchasing their own stock.
According to research by The Motley Fool, S&P 500 companies collectively spent $249 billion buying back their stock in the third quarter of 2025, and $777 billion over the first three quarters of last year. Estimates for fourth-quarter buybacks suggest that S&P 500 share repurchases blew past $1 trillion for the first time in history in 2025.
Although Apple is at the front of the pack when it comes to buybacks ($841 billion in share repurchases since initiating a buyback program in fiscal 2013), many of Wall Street's AI hyperscalers are big-time buyers of their own stock. Alphabet has spent $346 billion buying back its shares over the trailing decade, while Meta has spent well over $200 billion repurchasing its own shares.
There are likely two reasons why S&P 500 companies have, in aggregate, been spending more money on buybacks than on AI data center build-outs.
S&P 500 Shiller PE Ratio hits 2nd highest level in history 🚨 The highest was the Dot Com Bubble 🤯 pic.twitter.com/Lx634H7xKa
-- Barchart (@Barchart) December 28, 2025
To begin with, the stock market is historically expensive. Using the S&P 500's Shiller Price-to-Earnings (P/E) Ratio as an objective measure of value, the Shiller P/E entered 2026 at its second-highest level over 155 years. Justifying the valuations of Wall Street's most influential companies is becoming more challenging. Thus, enter share buybacks.
Usually, public companies that are regularly repurchasing their common stock will see their outstanding share count decline over time. If these businesses are generating steady or growing net income, this dynamic will result in higher earnings per share (EPS) and potentially make them more fundamentally attractive to value-seeking investors. There's little question that Apple, Alphabet, Meta, and several other members of the S&P 500 have increased their EPS through aggressive share buybacks.
The second reason S&P 500 companies have likely been fascinated with buybacks is to partially or fully mask increases in share-based compensation. It's pretty common for Wall Street's most influential businesses to dole out common stock or options to executives, board members, and sometimes even long-tenured employees. To avoid share-based dilution that could potentially reduce EPS over time, many S&P 500 companies have devoted significant capital to buying back their shares.
While AI is undoubtedly Wall Street's primary growth driver, don't overlook the growing importance of share repurchases amid a historically pricey stock market.
