eToro Survey: Retail Investors View Tech Stocks as Overvalued, Yet Keep Buying
nashnova research
An eToro survey of 1,000 U.S. retail investors ranks tech as the most overvalued S&P 500 sector, yet flags AI as the biggest long-term opportunity — a contradiction that is driving continued dip-buying and defining the current tug-of-war in market sentiment.
They say it's expensive — so why are they still buying?
eToro surveyed 1,000 U.S. retail investors; results released Wednesday. Tech was named the most overvalued of all 11 S&P 500 sectors.
The same respondents called AI the market's biggest long-term opportunity. This means → retail knows the price is stretched but is betting the stretch is justified.
eToro analyst Bret Kenwell put it plainly: "Their logic is — after the run of the last few months, we may have gotten a bit ahead of ourselves, but the long-term direction hasn't changed."
Where is the "buy the dip" habit showing up now?
Retail investors have long been classic dip-buyers — buying into falling prices rather than selling. The survey shows nearly half of respondents prefer to invest in names sold off because of AI disruption.
Two reasons drive the buying: a belief that affected companies will ultimately benefit from AI, and a view that underlying business fundamentals remain solid.
In plain terms = retail is not gambling on a bounce. They believe "what fell is sentiment, not the business itself."
Semis hot, software cold — what is splitting apart inside tech?
The survey shows retail expectations for semiconductors and AI-related stocks have cooled somewhat, yet enthusiasm for the "Magnificent Seven" — Microsoft, Alphabet, Meta and peers — has not faded in step.
33% of respondents believe large tech platforms will deliver the strongest AI-driven returns, viewing the Mag Seven's recent underperformance versus the S&P 500 as a buying opportunity.
This reflects a shift in retail attention from "the whole sector rises" to "only the leaders are worth the bet" — the divergence within tech matters more than the sector's headline move.
Is the stock-picking logic changing?
Respondents ranked "lower valuations" and "strong fundamentals" as their top criteria for buying dips — not momentum alone. This means → retail's stock-picking logic is tilting toward fundamentals, not just chasing rallies.
For context: the S&P 500 IT sector is up roughly 15.8% year-to-date, on par with industrials and below energy's 18.8% — tech is not this year's best-performing sector.
The Nasdaq Composite closed Wednesday about 6% below its record closing high set earlier this month. Whether retail's continued buying can sustain current valuations is the key variable to watch.
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