Everyday investors still see long-term strength in the AI trade
Investors have flocked to tech stocks as they try to anticipate the effects of AI.
For retail investors, two seemingly contradictory things are true simultaneously. AI is the biggest long-term investing opportunity in the market right now, but tech stocks are overvalued.
This sentiment comes from brokerage eToro $(ETOR)$, which surveyed 1,000 retail investors in the U.S. and published those findings on Wednesday.
Retail investors ranked technology as the most overvalued of the 11 stock-market sectors, according to the survey. So far, the S&P 500 Information Technology Sector Index XX:SP500.45 has rallied around 15.8% year to date, which is in line with the S&P 500 Industrials Sector Index's XX:SP500.20 year-to-date gain and less than the S&P 500 Energy Sector Index's XX:SP500.10 18.8% gain.
Tech stocks have long been a favorite of retail investors, and large-cap tech names like the "Magnificent Seven" MAGS stocks - which include Alphabet, Amazon, Apple, Microsoft, Meta Platforms, Nvidia and Tesla - often top retail investors' lists of most actively traded stocks. And in recent months, many retail investors have backed semiconductor and memory-chip stocks - like Micron $(MU)$, Sandisk $(SNDK)$, Broadcom $(AVGO)$ and Intel $(INTC)$.
However, the tech sector isn't a monolith. While semiconductor stocks have rallied this year, many software names have been beaten up. With this dichotomy happening under the surface, retail investors are becoming judicious with how they pick investments within the sector.
"They said [tech] was the most overvalued sector, but then also felt it was the best long-term value," Bret Kenwell, U.S. investment analyst at eToro, told MarketWatch. "It's a looking at it in a way that says, 'right now, after these last couple months, we may have run a little too far.'"
In response to the recent rally, retail investors are looking for specific areas within the tech sector that present the biggest upside. According to the survey, 33% of retail investors thought that large tech platforms like Microsoft $(MSFT)$, Alphabet $(GOOG)$ $(GOOGL)$ and Meta (META) would generate the strongest investment returns as a result of AI developments. This is despite the fact that the "Magnificent Seven" as a whole has underperformed the S&P 500 this year and is currently in a correction.
But this same underperformance has retail investors thinking that large-cap tech may be a value play. Retail-investor expectations for semiconductor and AI-related stocks have dampened, but that has not been the case for the "Magnificent Seven."
"I think they're seeing value within the megacap names," Kenwell said, noting that many of the large tech companies are still seeing strong earnings growth in the face of declining share prices.
Retail investors as a whole are notorious dip-buyers, flooding into stocks that have declined sharply in order to score a discount. That mentality seems to be happening within the tech sector.
"Almost half of respondents said that they're more likely to invest in a space that's been beaten down by AI - the main reasons being they believe they'll eventually benefit from AI and they believe the underlying business is strong," Kenwell said.
The survey also pointed to an increasing emphasis on fundamentals for retail investors. Respondents ranked lower valuations and strong business fundamentals as the top motivations for buying into market dips.
As of Wednesday's close, the tech-heavy Nasdaq Composite COMP is down 6% from its all-time closing high reached at the start of the month. It remains to be seen whether this is a momentary reset after an impressive rally, or whether it could turn into a larger correction. But as markets churn, the survey suggests retail investors are thinking about how to position themselves for the years to come.
-Gordon Gottsegen
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(END) Dow Jones Newswires
June 24, 2026 16:49 ET (20:49 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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