The stock market continues to hit new highs in 2025, buoyed by a surge in megacap stocks and more speculative trades as investors’ appetite for risk continues to grow despite lingering economic uncertainties.
Palantir (PLTR), sometimes described as the quintessential meme stock, and Super Micro Computer (SMCI), the most heavily shorted stock in the S&P 500 (^GSPC) in April, have been among the top-performing equities this year, far outpacing the broader index.
While this speculative rally exists alongside record highs for AI giants like Nvidia (NVDA) and Meta (META), a fear of missing out appears to be a key force behind recent investor behavior.
“Retail traders’ fingerprints [are] all over it,” Liz Ann Sonders, chief investment strategist at Charles Schwab, said on Yahoo Finance’s Opening Bid this week, describing the market’s powerful rebound since the early April lows. The rally, she said, has been strengthened by a surge in “retail favorites or meme stocks, unprofitable tech,” and a “lower quality tilt” that has lifted riskier names — even penny stocks.
“Some complacency has crept in,” she said.
According to data from Goldman Sachs, the riskiest corners of the market, including high-beta momentum stocks, a bitcoin-sensitive index, and unprofitable tech, far outpaced the S&P 500 in the second quarter as investors chased speculative momentum.
Stablecoin issuer Circle (CRCL) and AI cloud provider CoreWeave (CRWV) have skyrocketed since their public debuts earlier this year, surging nearly 500% and 300%, respectively. Shares of Quantum Computing (QUBT) have also jumped, rising more than 60% over the past month amid a broader rally of the sector.
That surge in risk-taking is raising red flags for some on Wall Street, particularly as certain trades show an increasing disconnect from fundamentals.
“It’s the gamification of the financial markets that we’ve seen over the last five years,” Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, told Yahoo Finance on Tuesday. “It’s a considerable concern … There’s a lot of speculation there. Buyer beware.”
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According to Bespoke Investment Group, nearly 420 stocks in the Russell 3000 jumped more than 50% between the lows on April 8 and June 27, including 14 that soared over 200%. Of those highfliers, only four are profitable. On average, the 858 unprofitable companies in the index gained 36.4% during that stretch, more than doubling the 15.6% return seen among the 500 stocks with the lowest price-to-earnings ratios.
That kind of price action, driven more by momentum than financials, has become a defining feature of the current market environment.
“MOMO and FOMO are likely to dominate until proven otherwise,” Steve Sosnick, chief strategist at Interactive Brokers, wrote in a client note this week, noting that many investors chasing market leaders aren’t relying on traditional valuation metrics.
“I don’t think the traders who are buying Nvidia and other market leaders at continual all-time highs are doing an analysis of the companies’ discounted future cash flows,” he said, adding that momentum strategies, by nature, imply “fundamentals don’t matter” — at least for now.
“Ultimately, fundamentals do matter,” Sosnick continued. “But that reconciliation can come months, or years later.”
For now, investors seem content to ride the wave.
“Whatever hasn’t killed this market made it stronger,” Sosnick added. “But just because none of [the risks] have so far doesn’t mean they won’t.”
Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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