eToro Survey: Retail Investors View Tech Stocks as Overvalued, Yet Keep Buying
N.R. Finch
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.
Content is for reference only, not financial advice.