The financial strain tied to the tech sector’s heavy investment in artificial intelligence appears less severe than previously expected, as rising cash flows continue to outstrip capital expenditure growth, according to strategists at JPMorgan.
A team led by Nikolaos Panigirtzoglou estimates that the sector is on track to deliver cash flow growth of about 25% this year, compared with capital spending growth of roughly 20%.
This dynamic has allowed the sector “to increase its financing surplus and to bolster its share buybacks,” the strategists said, referring to the gap between cash generation and investment spending.
Higher shareholder returns expected
As a result, JPMorgan lifted its forecast for buybacks and dividends to $900 billion in 2026, up from $700 billion in 2025.
The pace of share repurchases had initially surprised analysts, given concerns over the cost of building AI infrastructure. Typically, such conditions would prompt companies to conserve cash rather than return it to investors.
However, strategists noted that stronger-than-expected earnings in recent quarters have improved the overall cash flow outlook. “We believe that the past few quarters have seen more favourable news in terms of the financing needs of the tech sector,” they said.
Long-term outlook still points to tighter surplus
Despite the near-term strength, the bank adjusted its longer-term assumptions, expecting a narrower but still positive funding surplus.
Previously, JPMorgan had projected annual cash flow growth of 20% alongside capital expenditure growth of 30%. It now forecasts capex growth of 25% against unchanged cash flow growth of 20%.
Under this scenario, the sector’s financing surplus is expected to gradually disappear by 2030, although strategists emphasized it does “not turn into deficit.”
Debt markets to play a larger role
To support ongoing investment while maintaining shareholder returns, tech companies are expected to rely more heavily on debt markets.
JPMorgan projects net bond issuance in the sector will rise from just over $200 billion this year to more than $600 billion annually by 2030.
Even so, the bank believes markets can absorb this increase. The projected $216 billion issuance in 2026 would account for roughly 4% of total net bond supply, increasing to about 10% by 2030 — levels described as “still manageable.”
Buyback activity shows mixed trends
Globally, share buybacks in the first quarter of 2026 were broadly in line with last year’s pace. However, April has seen a noticeable slowdown compared with the same month in 2025.
Strategists linked this shift to the rapid rebound in equity markets to record highs, reducing the need for companies to support their stock prices.
By contrast, companies spent around $480 billion on buybacks in April and May last year, following a sharp market drop triggered by the initial Liberation Day tariff shock.