Big Tech's Free Cash Flow Pressures Are Driving a Broadening Bull Market
The U.S. equity market is broadening as Big Tech companies like Amazon (AMZN) and Alphabet (GOOG, GOOGL) face declining free cash flow yields due to aggressive capital expenditures for AI development. According to Goldman Sachs strategist Peter Oppenheimer, this has led investors to rotate into other sectors, contributing to a broader bull market. For the first time since 2009, the equally weighted S&P index outperformed the standard S&P 500 by over 7.3%. Factors supporting this shift include strong economic resilience in the U.S. and Europe, increased M&A activity, and momentum unwinds favoring smaller stocks. Capital expenditures from major tech firms have surged during recent earnings reports. Meta (META) raised its full-year capex target to $135 billion–$145 billion for 2026 while providing no guidance for 2027 due to uncertainty in infrastructure planning. Alphabet also increased its annual capital spending forecast and expects a significant rise in the coming year. With free cash flow outlooks likely subdued among top tech firms, this trend may continue supporting market broadening.
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Topics: Big Tech bull market free cash flow M&A activity S&P performance