BlockBeats report, June 17: Goldman Sachs believes the world is transitioning from a "modern" supercycle characterized by low inflation, low interest rates, and globalization into a "postmodern" cycle marked by higher macroeconomic volatility, higher real interest rates, stronger state intervention, and greater regionalization. In this environment, the era of returns driven by valuation expansion is coming to an end, with earnings per share growth becoming the central variable for market performance. In their report titled “The Postmodern Cycle: Navigating the Capital Expenditure Boom,” Goldman Sachs strategists Peter Oppenheimer, Sharon Bell, and others note that higher capital costs are constraining the scope for valuation multiple expansion, increasing cross-sectional dispersion in market returns. Strategies relying solely on beta exposure will face greater challenges, while the alpha value of active stock selection will rise significantly.
The report suggests that a wave of private capital spending driven by the AI revolution, combined with increased government public investment fueled by geopolitical factors, is giving rise to a super cycle of capital expenditure. According to Goldman Sachs data, first-quarter capital spending by S&P 500 companies in 2026 is expected to rise 38% year-over-year, while buyback growth is projected at just 1%, marking a reversal from the post-financial crisis trend in which corporations relied more heavily on buybacks than capital spending. Regarding AI-related spending, Goldman Sachs’ aggregation of market consensus estimates shows that Amazon, Meta, Google, Microsoft, and Oracle are collectively expected to spend approximately $75.5 billion in capital expenditures in 2026—an increase of about 80% from a year earlier and roughly 84% higher than their actual 2025 spending levels, with projected spending rising further to approximately $92 billion in 2027. Goldman Sachs notes that the momentum in capital spending is now spreading from data centers to energy, industrial, and infrastructure sectors.
Goldman Sachs notes that the growth of tech giants is increasingly dependent on physical infrastructure such as data centers and power supply, which will create a "cascading effect," driving capital expenditure spillovers into traditional value sectors like industrials, energy, and utilities. Meanwhile, geopolitical pressures are boosting defense spending, supporting demand for traditional defense equipment such as aircraft, tanks, ammunition, and ships. Goldman Sachs reaffirms its preference for stocks benefiting from capital expenditure and recommends four thematic investment baskets: artificial intelligence, defense spending, power and electrification, and HALO (heavy-asset stocks). The firm believes that overall index-level returns may become muted in the future, but relative returns across geographies, industries, and styles will widen, ushering investors into a new era where active management and alpha generation hold greater value.