S&P 500 Equal Weight Index Hits All-Time High as Wall Street’s Divide Grows Wider

If you blinked, you missed it: the S&P 500 Equal Weight Index just notched a fresh all-time high, and the market’s reaction was a collective shrug. For traders who still think the only thing that matters is the headline S&P 500, it’s time to look under the hood. The real story is the growing chasm between the market’s megacap darlings and the rest of the index, a divide that’s now so wide you could drive a Rivian through it.

The news cycle is obsessed with AI-driven capex blowouts and the implosion of software stocks, but while everyone’s staring at the XLK’s flatline at $141.06, the equal weight index has quietly powered higher. Michael Reinking of the NYSE flagged this on YouTube, pointing out that the S&P 500 Equal Weight hit an all-time high yesterday, even as the narrative around AI and tech stocks soured.

Let’s talk numbers. The S&P 500 Equal Weight Index (SPXEW) is now outperforming the cap-weighted S&P 500 by the widest margin since the post-pandemic reopening. The rotation out of AI and software names has been swift, with the likes of Alphabet, Meta, and AMD reporting earnings that failed to inspire. Meanwhile, old-economy sectors, think industrials, financials, and even a few battered consumer names, are catching a bid. This is not your 2021 market, where the only thing that mattered was the next big thing in AI.

Wall Street’s wild week has rattled investor confidence, with MarketWatch quoting strategists who see “two different markets right now.” That’s not hyperbole. The equal weight index is a proxy for breadth, and right now, breadth is the only thing keeping this market from rolling over. The AI trade is looking tired, and the market’s primary narrative, AI will eat the world, might finally be collapsing under its own weight.

The context here is critical. The S&P 500’s cap-weighted rally in 2025 was driven by a handful of megacaps. But as the cost of AI infrastructure explodes (Big Four capex now set to hit $600 billion in FY2026, up 70% year-over-year, per Seeking Alpha), investors are waking up to the risk that the AI trade is not a free lunch. The equal weight index’s breakout suggests that capital is rotating into the rest of the market.

This is not a gentle rotation, either. Software and AI-exposed stocks have stumbled out of the gate in 2026, with the sell-off picking up pace in February. Benzinga notes that investors are fleeing software for old-economy stocks, and the numbers back it up: XLK is stuck at $141.06 (+0%), while the equal weight index grinds higher.

So what’s driving this? For one, the full effects of tariffs are about to show up in the January CPI report, according to Seeking Alpha. That’s a macro wildcard that could hit profit margins for the megacaps hardest. Second, the Fed is still laser-focused on getting inflation back to 2%, with Atlanta Fed President Bostic reminding Bloomberg that the job isn’t done. If the Fed stays hawkish, the cost of capital for capex-heavy tech firms keeps rising.

The market’s risk profile is quietly being reshaped. What looks like innovation, AI, cloud, data centers, may be creating a dangerous new dependency. If the equal weight index keeps outperforming, it’s a sign that the market is ready to move on from the AI bubble and rediscover the virtues of diversification.

Strykr Watch

Technical levels are telling a story of their own. The S&P 500 Equal Weight Index is breaking out above its previous resistance, while XLK remains pinned at $141.06. Breadth indicators are improving, with the advance-decline line confirming the move. Watch for support at recent breakout levels, and keep an eye on the relative strength of industrials and financials. If the equal weight index holds its gains, this rotation could have legs.

But don’t get complacent. The next CPI report is a landmine, and any hawkish surprise from the Fed could slam the brakes on this rotation. If the equal weight index rolls over, it’s back to the same old story: megacaps or bust.

The risk here is that the AI narrative still has a grip on market psychology. If Nvidia or Microsoft surprise to the upside, the crowd could pile back into tech, leaving the rest of the market in the dust. But for now, the rotation is real, and the equal weight index is the canary in the coal mine.

Opportunities abound for traders who are willing to look beyond the usual suspects. Long trades in industrials, financials, and select consumer names offer better risk-reward than chasing tech at these levels. Look for pullbacks to recent breakout zones as entry points, with stops below key support. If the rotation continues, targets are well above current levels.

Strykr Take

This is not just another sector rotation. The outperformance of the S&P 500 Equal Weight Index signals a fundamental shift in market leadership. The AI trade is exhausted, and capital is flowing to where the risk-adjusted returns look better. Ignore the headlines about megacaps and watch the breadth. The next leg higher will be led by the parts of the market everyone forgot about.

Strykr Pulse 68/100. Breadth is improving, rotation is real, but macro risks linger. Threat Level 3/5.