Despite the S&P 500 hovering near record highs, nearly 60% of its component stocks are in a technical bear market. Goldman Sachs warns that this gap is widening due to investor fears over the high cost of artificial intelligence infrastructure, shifting focus away from tech megacaps.
The U.S. stock market is currently showing two different realities. While the S&P 500 index continues to hover near its all-time high, the internal health of the market is weak. Goldman Sachs has highlighted this phenomenon as a "stealth bear market," where approximately 60% of the companies within the index have fallen 20% or more from their 52-week peaks.
This disconnect suggests that the headline index performance is being propped up by a small number of massive technology companies, often called the "Mag-7" or hyperscalers. For most other stocks in the index, the environment has been significantly more challenging throughout 2026.
The primary tension currently driving this divergence is the intense spending on artificial intelligence infrastructure. Major companies like Microsoft, Alphabet, Amazon, and Meta are expected to deploy between $725 billion and $800 billion in capital spending during 2026. While these companies report strong cloud revenue, investors are becoming increasingly anxious about the massive scale of this investment and the time it will take to see a meaningful return. As these companies shift from being cash-generating machines to heavy capital spenders, investors are questioning if this high-spending phase is sustainable.
This shift in sentiment has led to a rotation of capital. Investors are moving money out of growth-oriented technology stocks and into defensive sectors such as healthcare, consumer staples, and real estate, which are generally perceived as safer during periods of market uncertainty.
Warning signs are also appearing outside of the stock market. The credit markets, which track the health of corporate debt, are showing signs of stress. The difference in interest rates between B-rated and CCC-rated bonds has widened to roughly 8%. Historically, such widening gaps indicate that investors are becoming more worried about the ability of companies to pay back debt. When these spreads increase, it often serves as a signal that the broader market has not fully accounted for the risks of tighter financial conditions.
For investors, the key monitorables moving forward will include the efficiency of AI-related capital spending and the stability of credit markets. If the massive spending on AI does not translate into faster profit growth soon, or if credit stress spreads to larger companies, market volatility could increase. The current situation suggests that while the headline index remains resilient, the underlying market may be undergoing a significant repricing of risk.