By Gordon Gottsegen
83% of retail investors expect tech stocks to outperform the market, survey finds
The stock market just had two strong back-to-back years, with the S&P 500 SPX growing more than 23% in 2024 and 24% in 2023. While some retail investors are likely celebrating the growth of their portfolios, others are starting to get wary.
A survey by retail brokerage Moomoo (FUTU) found that retail investors are feeling less bullish about the stock market, partly due to high valuations among tech and artificial-intelligence stocks.
Read more: Tech sector plunges as Wall Street’s fears over stretched stock valuations intensify
The survey polled 1,200 retail investors across the U.S. and Canada at the end of December. Many of them – 42% – said they were feeling bullish about the stock market going into 2025, a slight drop from the 45% who were bullish at the start of 2024. Meanwhile, 21% of investors felt bearish going into 2025, and 37% were neutral.
“Tech stocks have outperformed the overall market in the last two years and often some investors will naturally expect that run to continue, but many of our users are pretty savvy and understand such trends do not exist in a vacuum,” Justin Zacks, vice president of strategy at Moomoo, told MarketWatch in an email.
“Valuation matters to them,” he said. “This is particularly apparent in the AI sector, which the majority of the survey respondents feel is overvalued.”
Moomoo noted a jump in the number of investors who thought the stocks at the center of the AI revolution were overvalued, with 64% of respondents saying these AI and tech stocks were overvalued, up from 54% a year earlier.
Despite this shifting sentiment, the survey found that retail investors still overwhelmingly expect tech stocks to outperform, with 83% believing the tech sector will outpace the broader market in 2025.
That’s essentially unchanged from the 84% who expected tech outperformance in the second half of 2024. However, Moomoo pointed out that the tech-heavy Nasdaq 100 index NDX grew by less than the S&P 500 in the second half of 2024 – 6.8% versus the S&P’s 7.7%. So these new responses came in after tech stocks had lost some of their momentum and the broader market had started to catch up.
Retail investors have proven to have a strong affinity for tech stocks in recent years – and that attachment may be hard to shake. “Magnificent Seven” megacap tech stocks such as Nvidia Corp. (NVDA), Apple Inc. (AAPL) and Tesla Inc. (TSLA) have been favorites among retail investors and often rank among the most-traded tickers and highest-weighted positions in retail portfolios.
“There is still an expectation for continued tech outperformance overall, though with some investors expecting tech stocks will grow quickly to support current valuations,” Zacks said.
However, some fear has infiltrated the market. On Monday, tech and AI stocks saw a significant selloff after Chinese AI company DeepSeek claimed to have trained its AI model with significantly fewer resources than competitors such as OpenAI’s ChatGPT. The Nasdaq Composite COMP was trading 3.5% lower, and Nvidia dropped by as much as 17.5%.
As the stock market continues to process the latest developments in the AI industry, retail investors are feeling more positive about the economy in general. The survey found that fewer retail investors see inflation as “a huge problem” compared with last year, and fewer expect a recession in the near future.
-Gordon Gottsegen
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01-27-25 1408ET
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