Look no further than Big Tech’s free cash flow concerns as the primary culprit for the bull market in stocks broadening out to other sectors. 

Quick analysis: The US equity market, dominated by hyperscalers like Amazon (AMZN) and Alphabet (GOOG, GOOGL), has experienced a sharp decline in free cash flow yield relative to more value-oriented markets, such as Europe, helping to support the rotations of relative performance, Goldman Sachs strategist Peter Oppenheimer said in a new note (see his chart below). 

Free cash flow has come under increasing pressure as tech giants spend aggressively on capex to support their AI ambitions. 

Concerns that Big Tech companies are spending too much — and the likelihood that they will continue and weigh down cash flow — have caused a noticeable broadening out in the stock market. 

For the first time since 2009, Oppenheimer noted, the equally weighted S&P, for example, has outperformed the S&P 500 (^GSPC) by more than 7.3%.

“This has been supported by several factors,” Oppenheimer explained. “First, the resilience of the broader economies, particularly in the US and Europe, where the median stock has performed best. Second, the pick-up in M&A, which is attracting interest across the market, and away from the largest cap stocks. Small caps have outperformed large caps in the US. Third, the sharp momentum unwind of recent weeks has supported a widening of participation amid a rotation of leadership.”

The zoom out: Capital expenditure numbers from Big Tech this earnings season have been eye-popping.

Meta (META) raised the bottom end of its 2026 capital expenditure target, tightening the full-year spending range to $135 billion to $145 billion, up from $125 billion to $145 billion.

But specifics about 2027 capital expenditures were nonexistent. 

“We aren’t providing a specific outlook for 2027 capex at this time,” Meta CFO Susan Li told analysts on a late-Wednesday earnings call.

Li added, “Infrastructure planning remains highly dynamic. Even this year, there are a range of outcomes embedded in our outlook.”

Alphabet’s second quarter capital expenditures came in at $44.9 billion, slightly above Wall Street forecasts of $44.7 billion. Full-year capex guidance was raised to $195 billion to $205 billion from $180 billion to $190 billion, with a “significant” increase seen for 2027, executives said on the earnings call. 

Bottom line: With free cash flow outlooks likely to remain subdued among prominent tech names in the medium term, it’s plausible that the broadening in the market will stretch on.