NEW YORK – The stock market is scaling new heights in 2025, but beneath the celebration of record highs lies a growing concern: the rally is being fueled by a speculative frenzy that heavily favors risk over fundamentals, raising red flags across Wall Street.
While AI giants like Nvidia (NVDA) and Meta (META) continue their impressive runs, a parallel surge in more speculative assets—from “meme stocks” like Palantir (PLTR) to unprofitable tech companies—suggests a powerful “fear of missing out” (FOMO) is gripping investors.
“Retail Traders’ Fingerprints All Over It”
This surge in risk-taking has “retail traders’ fingerprints all over it,” according to Liz Ann Sonders, chief investment strategist at Charles Schwab. Describing the market’s powerful rebound since early April, she noted that the rally has been defined by a “lower quality tilt” and a surge in “retail favorites,” indicating that “some complacency has crept in.”
The data paints a stark picture of this speculative fever. According to Bespoke Investment Group, of the 14 Russell 3000 stocks that soared over 200% between early April and late June, only four are profitable.
On average, the 858 unprofitable companies in the index surged an astonishing 36.4% during that period. This more than doubled the 15.6% return seen among the 500 companies with the lowest price-to-earnings ratios, proving that in this market, profits have taken a backseat to momentum.
This trend is echoed by data from Goldman Sachs, which shows that the market’s riskiest corners—including high-beta momentum stocks and unprofitable tech—dramatically outpaced the broader S&P 500 in the second quarter. High-flying new listings like stablecoin issuer Circle (CRCL) and AI cloud provider CoreWeave (CRWV) have skyrocketed nearly 500% and 300%, respectively, since their debuts.
The “Gamification of Financial Markets”
This disconnect between stock performance and business fundamentals is causing unease among seasoned market watchers.
“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, calling it a “considerable concern.” His message to those chasing the rally was blunt: “There’s a lot of speculation there. Buyer beware.”
The prevailing sentiment is that momentum (MOMO) and fear of missing out (FOMO) are the dominant forces at play. Steve Sosnick, chief strategist at Interactive Brokers, noted that many investors chasing market leaders aren’t basing their decisions on traditional valuation.
“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,” Sosnick wrote, adding that momentum trading, by its nature, implies “fundamentals don’t matter”—at least for now.
But he, like other strategists, issued a crucial warning about the inevitable endgame.
“Ultimately, fundamentals do matter,” Sosnick concluded. “But that reconciliation can come months, or years later.”
