Goldman Sachs "2025 US Share Buybacks to Reach $1 Trillion"

AI Boom and Fed Interest Rate Cut Effects

Next year, the scale of share buybacks by U.S. companies is expected to exceed $1 trillion (approximately 1,324 trillion KRW) for the first time in history. The growth of tech companies fueled by the artificial intelligence (AI) boom and the Federal Reserve's (Fed) interest rate cuts are cited as the main reasons.

According to Bloomberg on the 7th (local time), Goldman Sachs predicted that the scale of share buybacks by U.S. companies in 2025 will increase by 16% compared to this year, reaching $1.08 trillion (approximately 1,430 trillion KRW). This year’s share buyback scale is expected to reach $925 billion (approximately 1,244 trillion KRW), a 13% increase from last year.

[Image source=Reuters Yonhap News]

Companies buy back their shares when they have confidence in future growth and believe their stock is undervalued. The S&P 500 index has risen about 7% this year on expectations of the AI boom and interest rate cuts. Some on Wall Street also see room for further gains in the S&P 500 index.

The resolution of political uncertainties is another reason why U.S. companies are expected to engage in large-scale share buybacks next year. Goldman Sachs U.S. equity strategists Cormac Connors and David Kostin noted that since the U.S. presidential election is scheduled for November this year, companies may postpone large-scale share buybacks until next year.

Large-scale share buybacks are expected to be led especially by cash-rich big technology companies (Big Tech). Goldman Sachs strategists said, "Earnings growth is the most important driver of share buybacks," and "large-cap companies are expected to account for a significant portion." They added, "Tech companies’ revenues will be supported by strong consumer spending and increased demand for AI-related products." They also forecast that U.S. tech companies, backed by rapid revenue growth, will be able to fund AI investments over the next few years without compromising shareholder returns.

Meanwhile, last year’s share buyback scale was $815 billion (approximately 1,079 trillion KRW), a 14% decrease compared to the previous year. This was the second-largest decline since the 2008 global financial crisis.

This content was produced with the assistance of AI translation services.