The S&P 500 free cash flow yield has dropped to approximately 2.58% as of late September 2025, a level not seen since the dot-com bubble 25 years ago, according to Goldman Sachs analysis. This compression is primarily driven by massive investments from major technology companies in artificial intelligence infrastructure, including data centers and custom chips. The S&P 500 yield has fallen below the 10-year Treasury yield, which stood at 4.11%, making fixed income the higher-yielding option on a current cash return basis. In comparison, European equities like the Stoxx 600 offer a free cash flow yield near 5%, representing a significant spread that institutional allocators have already started acting on. For portfolios concentrated in large-cap US tech, the margin for error has narrowed as prices already embed significant optimism about future cash flows.
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