AI capex cycle signals healthy capital markets funding, not a late-cycle top, says SocGen strategist

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The AI capex cycle is driving a reopening of capital markets rather than signaling a late-cycle market top, according to Manish Kabra, head of U.S. equity strategy at Société Générale. The S&P 500 share count has risen about 2.6% since 2023, reversing the roughly 9% decline seen in the 2010s, as buyback growth moderates and issuance picks up. Kabra notes that current share growth is stabilizing closer to 1%, far below the 3% annual pace during the 1990s TMT build-out, and that elevated issuance can persist without marking a peak, as seen with major IPOs like Netscape, Yahoo, Amazon, and eBay. He highlights that equity market tops have historically aligned with surges in M&A activity, such as the AOL–Time Warner deal in early 2000, but M&A remains subdued today with no comparable surge in large transactions. Both issuance and deal volumes have rebounded from post-2022 lows but remain well below prior cycle peaks, suggesting conditions are consistent with an ongoing expansion rather than a 'big top.'