The Strategist

Major U.S. companies increase capital investment

08/08/2022 - 10:57

The allocation of funds for capital expenditures by large American businesses is increasing at a record pace, according to an examination of corporate reports from S&P 500 American companies by experts at S&P Dow Jones Indices, which quotes The Wall Street Journal.

Vlad Lazarenko
Vlad Lazarenko
The number of money allocated to CAPEX surpassed the amount of funds allocated by corporations to repurchase their shares from the market (buybacks) for the first time since the first quarter of 2021.

After examining the second-quarter statements that have already been released by around two-thirds of the S&P500 companies, experts forecast that CAPEX is allotted $149.8 billion, which is a 20% increase over a year ago. At the same time, the amount set aside for buybacks increased by only 10% from the previous year to $160.8 billion, while the amount set aside for dividends increased by 14% to $140.6 billion.

Stock analysts argue that the relatively calm response of the U.S. stock market's is due to the expansion of funds for CAPEX, which indicates corporations' confidence in future development.

High-tech, industrial, and consumer goods industries have all seen increases in capital investment. For instance, Alphabet (Google's parent company) increased its CAPEX allocation in the second quarter from $5.5 billion to $6.8 billion; GM increased its CAPEX allocation from $1.5 billion to $2.1 billion; and Pepsi increased its CAPEX allocation from $1.3 billion to $1.5 billion.