Buybacks vs. the Supply Deluge: Can $1.4 Trillion Absorb a Record IPO Wave?

The Supply Side: A Record Quarter and a Mega-Deal Echo

The US equity market just absorbed a supply shock that, by headline numbers, ranks among the largest in history. Total equity issuance — IPOs, follow-ons, convertibles, and SPACs combined — reached $252 billion in the second quarter of 2026, setting a new quarterly record and eclipsing the prior high of $234 billion recorded in the first quarter of 2021.^[1]

Through July, US companies raised $105 billion from follow-on offerings alone, year to date — the highest level for that point in the calendar since 2021.^[1]

The single deal that defined the quarter was not a domestic company at all. Korea-listed SK hynix (SKHY) raised $26.5 billion in its US listing, the largest US equity offering ever from a foreign issuer.^[2] That one deal drove total July IPO proceeds to $29.3 billion across eight IPOs — more than six times the 10-year historical average of $4.7 billion for the month.^[2]

Yet beneath those headlines, deal flow was actually thin. Eight IPOs in July compared to a historical monthly average of roughly 20.^[2] Renaissance Capital attributed the gap to persistent volatility tied to AI spending fears and the Iran war.^[2] And for the year, the count of larger IPOs (market cap above $50 million) is actually down 23.8% from 2025, even though proceeds are up.^[3] In other words: fewer deals, but much bigger ones.

The Lockup Test: SpaceX Unlocks $101 Billion

The most immediate market-structure event this week was not a new IPO but the expiration of the first post-IPO lockup for SpaceX (SPCX). On Thursday, August 6, more than 911 million shares — representing roughly $101 billion in market value — became eligible for sale by early investors and employees.^[4]

The staggered lockup schedule will free an additional 12.9 billion shares by mid-2027, according to Reuters, meaning the unlock is not a one-day event but a rolling supply overhang.^[4]

The immediate reaction defied expectations: SpaceX shares rose approximately 6% on the day the lockup expired, even after a sharp run-down in the days leading up to it.^[4] Investors had apparently priced in heavier selling than materialized. Still, the question of who is selling — and at what pace over coming months — remains the key variable for float absorption.

Six additional IPO lock-up releases are on the calendar in the near term, according to Renaissance Capital’s week-ahead note.^[5]

The Demand Side: Goldman’s $1.4 Trillion Counterweight

Goldman Sachs strategists, led by Ben Snider, argue that corporate demand for US equities should exceed new supply this year, even with issuance at multi-year highs. Their case rests on three pillars.^[1]

Buybacks remain dominant. S&P 500 repurchase activity tracked an 11% year-over-year increase in the second quarter. New share repurchase authorizations have reached nearly $1 trillion year to date — a record level for that span. Goldman estimates total buybacks of $1.4 trillion in 2026, which would more than offset roughly $700 billion in primary equity issuance plus potential supply from expiring lockups.^[1]

Issuance is normalizing, not surging. While the $252 billion Q2 figure is a record, both the count of offerings and issuance measured against total equity market capitalization remain below long-term averages. Activity is concentrated in a relatively small number of large transactions — the SK hynix deal alone accounted for the bulk of July’s volume.^[1]

No signs of indigestion. Goldman reports no abnormal patterns in offering discounts or post-offering share performance, suggesting the market is absorbing new supply without strain.^[1]

AI as the Engine of Supply

The structural driver behind the issuance wave is AI-related capital expenditure. Goldman estimates that AI-linked transactions accounted for roughly 40% of US follow-on equity volume this year, and the bank expects that proportion to keep rising.^[1]

The funding math is staggering. Consensus estimates project hyperscaler capital expenditures of $1.1 trillion in 2027, exceeding operating cash flow by $150 billion, before turning free-cash-flow positive in 2028.^[1] Goldman’s credit strategists expect debt to fund about 35% of that 2027 capex — roughly $400 billion in global bond issuance — with equity filling the remainder.^[1]

This is where the debate sharpens. If hyperscaler capex comes in above consensus — as many investors expect — the funding gap widens, and equity issuance must rise to fill it. Goldman acknowledges this risk explicitly.^[1]

The Counter-Argument: Ninety One’s “End of De-Equitisation”

Investment manager Ninety One published research in late July titled “AI and the Return of US Equity Supply,” arguing that the two-decade trend of de-equitisation — where buybacks consistently outpaced new issuance, steadily shrinking the pool of publicly traded shares — has been a persistent but underappreciated tailwind for US equity returns.^[6]

The paper, authored by Sahil Mahtani, Director of the Investment Institute, and analyst Dan Morgan, contends that the AI IPO boom could reverse that tailwind. As new issuance floods the market, the share-count shrinkage that mechanically boosted per-share metrics and supported valuations would slow, stop, or even reverse.^[6]

Ninety One further suggests that emerging markets — where de-equitisation has not been a factor — could stand to benefit relatively if US equity supply dynamics turn less favorable.^[6]

What Each Side Would Need to Be Right

The Goldman and Ninety One frameworks are not irreconcilable — they operate on different time horizons and ask different questions.

Goldman’s view holds if: buyback momentum stays at or above the current 11% YoY growth pace, capex comes in near consensus rather than above it, and the concentration of issuance in a few large deals persists (limiting broad-based supply pressure). Under those conditions, $1.4 trillion in repurchases can absorb $700 billion in primary supply plus lockup releases, and net corporate demand stays positive.

Ninety One’s view holds if: hyperscaler capex exceeds consensus by a meaningful margin, forcing equity issuance well beyond current projections, and if the broadening of the IPO window — already visible in July’s consumer names like Jersey Mike’s — accelerates into a wider deal pipeline that buybacks were never sized to absorb. Under that scenario, the multi-decade share-shrinkage tailwind flattens, and the supply-demand balance shifts structurally rather than cyclically.

The base rate, for now, favors Goldman’s near-term reading: issuance concentrated in large deals, buybacks at record pace, no market indigestion. But base rates can shift when the underlying structural driver — AI capex — is itself on an unprecedented trajectory.

The Summer Breather — and What Comes After

The IPO market is entering its traditional August lull. Only one sizable US IPO is currently on the calendar for the week ahead: Shenzhen-based Londian Wason New Energy Tech (FOIL), aiming to raise $75 million at a $1.6 billion market cap.^[5] Robinhood’s second private-tech closed-end fund (RVII), seeking $200 million, is also slated but is excluded from Renaissance’s IPO statistics.^[5]

The Renaissance IPO Index fell 14% in July, underperforming a flat S&P 500, as the rotation out of tech and AI infrastructure names weighed on recent new listings.^[2] For the year, however, the IPO index remains up 18.6%, ahead of the S&P 500’s 13.4%.^[5]

Filing activity held a brisk pace in July, boosted primarily by biotechs capitalizing on strong recent debuts, with defense and consumer names also in the pipeline.^[2] Renaissance expects several more deals to slip in before the summer pause, with conditions then hinging on fluctuating sentiment around AI.^[2]

Meanwhile, in the private markets, the PE secondaries market closed H1 2026 at a record $121 billion in volume, up 19% year-over-year, with GP-led secondaries hitting $65 billion — up 35%.^[7] That record pace, with an estimated $194 billion in dry powder,^[7] signals that liquidity channels outside the IPO route are also expanding rapidly, giving companies and their investors alternative exit paths that compete with or precede public listings.

What to Watch Next

• SpaceX lockup selling pace. The shares rose on day one, but the staggered schedule means supply pressure will persist through mid-2027.^[4] Watch for Form 4 filings and volume patterns over the next several weeks for evidence of insider distribution.

• Hyperscaler Q3 earnings and capex guidance. If revised capex estimates push above the current $1.1 trillion 2027 consensus,^[1] the equity-issuance implications ripple forward — and Ninety One’s thesis gains traction.

• Post-summer IPO calendar breadth. Renaissance noted the IPO window was broadening in July beyond AI and biotech into consumer names.^[2] If September brings a wider sector mix, that tests whether buybacks can absorb supply across more of the market, not just concentrated mega-deals.

• Buyback execution vs. authorization. New authorizations are at a record ~$1 trillion pace,^[1] but authorization is not execution. The gap between announced and completed repurchases will determine whether the demand-side offset is real or aspirational.

• Biotech IPO sustainability. New biotech filings drove July’s pipeline activity.^[2] Biotech is a sector where follow-on dilution is common post-IPO; sustained issuance there is a quiet test of broader market appetite for equity supply.

FN2 Research provides market commentary and education, not personalized investment advice.