--- title: "A Market Divided: Investors Rotate Out of Big Tech as the S&P 500 Splits in Two" description: "The stock market is running two races at once. The headline S&P 500, dominated by a handful of tech giants, is lagging — while the broader mass of American stocks quietly surges. Analysts say the rotation out of megacap tech has shifted from a drift into a sprint." category: "Business" category_url: https://herald.la/category/business author: "Naomi Fields" published: 2026-06-27T11:38:47.000Z updated: 2026-06-27T11:38:47.000Z canonical: https://herald.la/article/a-market-divided-investors-rotate-out-of-big-tech-as-the-s-p-500-splits-in-two tags: ["S&P 500", "stocks", "technology", "Magnificent Seven", "investing", "Wall Street"] --- # A Market Divided: Investors Rotate Out of Big Tech as the S&P 500 Splits in Two The stock market is running two races at once. The headline S&P 500, dominated by a handful of tech giants, is lagging — while the broader mass of American stocks quietly surges. Analysts say the rotation out of megacap tech has shifted from a drift into a sprint. For three years, owning an S&P 500 index fund has meant, in practice, making a concentrated bet on a small club of technology giants. That bet is now unwinding — and it is reshaping how the market behaves beneath the surface. ## Two versions of the same index There are two ways to build the S&P 500. The familiar version is weighted by market value, so the biggest companies count the most. The other — the equal-weight index — gives each of the 500 members the same small slice, regardless of size. For years the two moved more or less together. Lately they have diverged sharply. The equal-weight S&P 500 is having one of its strongest stretches relative to the cap-weighted version in decades, [according to Nationwide Financial](https://www.nationwide.com/financial-professionals/blog/markets-economy/articles/is-the-rotation-for-real-what-the-equal-weighted-index-is-signaling), which described the early-2026 gap as the widest since 1992. In plain terms: most stocks are doing better than the headline number suggests, because that headline number is being dragged down by a few slumping mega-caps. ## How the index got so top-heavy The reason the divergence matters is concentration. By late 2025, the so-called Magnificent Seven — Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla — had swelled to roughly 37% of the cap-weighted index's value, and the top 10 companies controlled around 41%, [according to Benzinga](https://www.benzinga.com/Opinion/26/05/52416895/the-sp-500-equal-weight-vs-market-cap-weight-debate-why-it-matters-for-your-portfolio) — double the top 10's share a decade earlier. Over 2023 through 2025, the cap-weighted index beat its equal-weight cousin by about 32 percentage points, one of the widest three-year gaps on record. When stocks that large fall, they pull the whole headline index down with them — even as money flowing out of them into other sectors barely registers there. ## Where the money is going That rotation is showing up in the sectors investors long ignored. Over the past month, energy and materials stocks have led gains while technology has lagged, [Yahoo Finance reported](https://finance.yahoo.com/news/long-equal-weighted-etfs-keep-132100938.html). In the equal-weight construction, financials and industrials — not tech — now sit at the top. ## Why now Analysts point to a narrowing earnings gap. For two years the Magnificent Seven posted profit growth that dwarfed the rest of corporate America; by late 2025 that lead had shrunk as more traditional companies used cheaper AI tools to cut costs and widen margins. Mark Hackett, chief market strategist at Nationwide, argued the shift has "deeper structural support" than a simple repositioning, noting that profit-margin forecasts for the broader equal-weighted index "have continued to strengthen." Whether the rotation lasts is the open question, and concentration that extreme has unwound before. For everyday investors, the practical lesson is about optics: the S&P 500 figure scrolling across the ticker can look flat even while most of the stocks inside it are climbing. The market has split in two — and for now, the less glamorous half is winning. ## Sources - [Is the rotation for real? What the equal-weighted index is signaling](https://www.nationwide.com/financial-professionals/blog/markets-economy/articles/is-the-rotation-for-real-what-the-equal-weighted-index-is-signaling) - [The S&P 500 equal weight vs. market-cap weight debate](https://www.benzinga.com/Opinion/26/05/52416895/the-sp-500-equal-weight-vs-market-cap-weight-debate-why-it-matters-for-your-portfolio) - [How long can equal-weighted ETFs keep outperforming the S&P 500?](https://finance.yahoo.com/news/long-equal-weighted-etfs-keep-132100938.html)