The free cash flow (FCF) yield of the S&P 500 index has dropped to approximately 2.58% as of late September 2025, reaching levels not observed since the dot-com bubble era. Subsequent analysis by Goldman Sachs in August 2026 placed the figure at roughly 2.7%.
This decline is largely attributed to massive capital expenditures by major technology companies focused on AI infrastructure, including data centers, custom chips, and energy capacity. The Minneapolis Federal Reserve noted that this trend has been accelerating since 2023.
The current FCF yield of the S&P 500 is lower than the 10-year Treasury yield, which stood at approximately 4.11% in late September 2025. This indicates that government bonds currently offer a higher cash return than major US equities.
Global market comparisons show significant divergence: while the Indian Nifty 50 index also tracks near a 2.7% FCF yield, the European Stoxx 600 index maintains a yield of approximately 5%. Institutional investors are increasingly noting this valuation gap.
