1.7 Trillion Unlock V.S 1.7 Trillion Buyback: Goldman Sachs Bets on the Latter to Sustain the US Stock Market Bull Run

According to Zhihu Finance APP, Goldman Sachs stated that U.S. companies are expected to refinance $600 billion through equity issuance by 2027, thus extending the current equity issuance boom partly fueled by AI investment. Although the increase in stock supply may put pressure on market valuations, the investment bank expects corporate buybacks and investor demand to help sustain the bull market.

In its latest research report, Goldman Sachs strategist Ben Snider forecasted that U.S. companies will raise $175 billion through IPOs next year and another $425 billion from follow-on offerings, convertible securities, and special purpose acquisition companies (SPACs).

This forecast comes after an extraordinary year for equity financing. So far in 2026, U.S. companies have issued about $431 billion in stocks, up 98% year-on-year. Goldman Sachs anticipates the total annual issuance will reach $675 billion, surpassing the previous record of $540 billion set in 2021.

For investors, the impact is twofold. A wave of new stocks may absorb capital that would otherwise support existing shares, especially as lock-up periods for recently IPO’d shares gradually expire. However, Goldman Sachs expects that continued earnings growth, lower interest rates, and aggressive corporate buybacks will strongly support stock prices.

Stock Supply May Reach Highest Level Since 2000

Goldman Sachs estimates that with the lifting of restrictions on recently issued shares, about $1.7 trillion worth of stock may become available for sale by 2027. Coupled with new stock issuance, even after accounting for corporate buybacks and cash-paid M&A, this could lead to the largest net increase in publicly traded U.S. shares since 2000.

The actual impact may be much smaller, as shareholders may not immediately sell newly unlocked holdings. Proceeds from reduced holdings may also be reinvested in the stock market.

Goldman Sachs forecasts that U.S. companies will repurchase about $1.7 trillion of their own shares in 2027, up from $1.5 trillion this year. Including cash M&A, corporate demand for equities is expected to exceed $2 trillion. Buyback activity has already accelerated. In the first half of 2026, S&P 500 (SP500) constituent companies increased their total buybacks by 15%, and as of October 5th, announced buyback authorizations totaled about $1.14 trillion, a 23% year-on-year increase.

AI Investment Fuels Issuance

Artificial intelligence infrastructure spending has become a significant driver of equity issuance, though Goldman Sachs expects debt financing and operating cash flow to remain the primary funding sources for the largest tech firms.

So far this year, AI-related follow-on offerings have raised approximately $65 billion, accounting for 45% of all U.S. follow-on issuance.

Goldman Sachs expects that major cloud computing companies—including Amazon (AMZN.US), Alphabet (GOOGL.US), Meta Platforms (META.US), Microsoft (MSFT.US), and Oracle (ORCL.US)—will spend about $1.2 trillion in capital expenditures by 2027, while generating $1.1 trillion in operating cash flow.

The firm’s credit strategists estimate that debt financing will cover about 35% of this expenditure, equivalent to more than $400 billion. These figures suggest that the largest technology companies may have limited need for additional equity issuance. However, small and mid-size companies involved in AI infrastructure construction may continue to turn to the equity markets for expansion financing and to protect their balance sheets.

Rising U.S. Treasury Yields Threaten IPO Recovery

The prospects for new equity issuance partly depend on interest rates, which have risen sharply in recent months.

According to Goldman Sachs, the benchmark 10-year U.S. Treasury yield has risen about 125 basis points over the past year, with more than 50 basis points of that increase since the end of August alone.

The rising cost of borrowing has slowed equity issuance. In the third quarter, companies raised $93 billion, down from a record $252 billion in the second quarter.

The number of offerings is also declining. September saw only 19 follow-on offerings and 5 IPOs, the lowest monthly level since the market turbulence in April 2025 related to tariffs.

Goldman Sachs expects the 10-year U.S. Treasury yield to drop from about 5.2% to 4.4% by the end of 2027, creating more favorable conditions for corporate financing.

Goldman Sachs Maintains Bullish Outlook on S&P 500

Despite a possible increase in stock supply, Goldman Sachs remains optimistic about the overall equity market.

The firm forecasts S&P 500 per-share earnings (EPS) will grow 11% to $415 in 2027, after an expected 36% increase to $375 this year. Goldman Sachs sets a 12-month target for the S&P 500 at 8,700, implying about 12% upside from its October 8 close of 7,765.

Investor demand remains robust. Data cited by Goldman Sachs from the Federal Reserve show that in the first half of 2026, U.S. households bought over $800 billion in stocks, while international investors added more than $350 billion.

However, the firm also notes signs of fragility under the market rally. For example, while the S&P 500 trades less than 1% below its record high, the median constituent stock is 16% off its own peak, reflecting an unusually narrow leadership in the market.

This concentration, combined with rising rates and expanding stock supply, may limit further expansion of valuation multiples.

Nevertheless, Goldman Sachs expects stronger corporate earnings and sustained demand from households and international investors to outweigh the pressure from new equity issuance, allowing the bull market to extend into 2027.