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Posted June 8, 2026 at 10:30 am
U.S. companies have an enviable problem: they’re drowning in cash. Since their prior peak in 2021, S&P 500 profit margins have risen 170bps to 15.6%. While the money pot has grown, so too have its uses. CEOs are preparing for the AI era, with capex expected to growth 33% in 2026 on top of 23% in 2025. The hyperscalers alone are projected to spend $700bn this year, hitting 100% of their operating cash flow, and they’re not the only ones. Capex for the rest of the S&P 500 is on track to reach $840bn, up 11% from 2025. While uses vary among non-hyperscalers, companies are investing in modernizing their tech stacks so they can effectively apply AI. M&A activity has also remained remarkably strong. 1Q26 announced volumes were the second highest ever, outdone only by the quarter before.
All this investment is pressuring shareholder returns. While buybacks are at a record in absolute terms, growth is slowing, up just 4% in 1Q26. Hyperscaler buybacks are down 64% y/y as management continues to allocate more cash to capex. As market cap has risen faster than repurchases, the S&P 500 buyback yield is near 5-year lows at 1.9%. The dividend yield is similarly weak at 1.3%, the lowest in over 25 years. All in all, S&P 500 companies are investing aggressively in an uncertain future, at the expense of shareholder returns. With the top 10 sitting at over 40% of the index, a view on each company’s strategy has never been more
Chart of the Week: Source: Compustat, FactSet, Standard & Poor’s,
J.P. Morgan Asset Management. *2026 data are as of the 1Q26
earnings season.
Thought of the week: Source: FactSet, Standard & Poor’s, J.P. Morgan
Asset Management. Data as of June 3, 2026.
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