S&P 500 Market Breadth Hits Dot-Com Bubble Lows Amid AI Stock Strength

Market breadth in the S&P 500 has fallen to its lowest level since the dot-com bubble, according to Goldman Sachs. The firm points out that while large-cap AI stocks are performing well, this strength is masking weakness across other parts of the index.

The median S&P 500 constituent is trading 16% below its 52-week high, and Goldman's sentiment indicator has fallen to -0.9, matching a low recorded in March.

Ben Snider, a strategist at Goldman Sachs, notes that these factors signal both upside potential for the broader market and the possibility of 'catch-up rallies' among recently lagging stocks if macroeconomic uncertainty eases.

The S&P 500 has returned 14% year-to-date, but its forward price-to-earnings ratio has declined from 22x to 19x, approaching its 10-year average. Goldman Sachs attributes this compression in part to rising interest rates and investor concerns that the AI spending boom is lifting corporate profits above sustainable levels.