The Motley Fool 2026 Stock Market Outlook: 58% of Individual Investors Plan to Buy More Stocks as AI Drives Optimism

Gen Z and millennials plan to drive 2026 investment

Gen Z and millennials are more likely than older generations to invest additional money in the stock market in 2026: 68% of Gen Z and 64% of millennials plan to increase their stock positions in 2026 compared to just 46% of Gen X and 39% of baby boomers.

Ownership of AI stocks sharpens that divide: 70% of AI investors plan to buy more stocks in 2026 compared with 46% of non-AI investors. That gap suggests optimism is being reinforced not just by headlines but by firsthand exposure to the performance and earnings power of companies like Nvidia (NVDA +1.95%), Alphabet (GOOG +0.08%), and Microsoft (MSFT -0.50%).

Overall, 58% of survey respondents intend to increase their investments outside their retirement accounts, while only 4% plan to pull back.

Nearly 70% of individual investors predict market gains of 4% or more in 2026

Most individual investors predict modest returns for the stock market in 2026, with 57% expecting returns of 4% to 9%. Another 11% expect the market to return 10% or more. Only 3% anticipate a large decline of 10% or more. To put those expectations into perspective, the S&P 500 returned an average of 13.5% annually over the last decade, and most individual investors are expecting a muted year for the market.

AI investors are slightly more bullish: 64% of AI investors expect modest gains (4% to 9%) in the stock market and 11% forecast strong gains (10%+) compared with 50% and 10%, respectively, for non-AI investors. That’s yet another sign that AI stock owners believe the technology will be so transformative as to drive higher returns across the market.

Tech and consumer discretionary are predicted to be the hottest market sectors

Information technology tops the list of market sectors expected to deliver the strongest returns in 2026, with 44% of individual investors selecting it among their top three market sector picks. Consumer discretionary (32%) and communication services (31%) follow closely, reflecting a belief that consumer spending will remain strong despite persistent affordability concerns.

“Survey respondents' overall appetite for these sectors aligns with their optimism on AI-based investment opportunities, especially in tech and communication services," said Motley Fool Senior Investment Analyst Asit Sharma. "And the persistence of the 'K-shaped' recovery lends credibility to respondents' enthusiasm for consumer discretionary stocks – and not consumer staples," he added, referring to a recovery in which some sectors see accelerated growth while others stagnate or decline.

AI stock ownership doesn’t materially change enthusiasm for tech overall, but it does influence where investors see spillover effects.

• AI investors are more likely to favor communication services, consumer discretionary, and consumer staples, market sectors they see benefiting from AI-driven efficiency, personalization, and automation.
• Non-AI investors are more inclined to expect utility stocks to outperform, pointing to a more defensive or income-oriented tilt.

While enthusiasm for AI and technology stocks remains strong, diversification remains important, especially as the market rapidly evolves. Rather than concentrating portfolios in a single sector or a handful of high-flying stocks, spreading investments across multiple market sectors and types of stocks, including value stocks, small- and mid-cap companies, and international markets, can help manage risk and capture a broader range of opportunities. This approach is especially relevant because market leadership – currently somewhat concentrated – might shift and as valuations in certain sectors become stretched.

The sectors that individual investors predict to have the lowest returns are:

• Real estate (30%), as the office market continues to recalibrate post-COVID and housing demand slows.
• Healthcare (26%), which faces pricing and regulatory pressures.
• Materials (24%), which underperformed the S&P 500 in 2025.
• Consumer staples (24%), which also lagged behind the S&P 500 and are composed of relatively defensive stocks.

Sharma, however, sees the real estate and healthcare sectors as potentially in line for a better-than-expected year. "Real estate and healthcare are both due for a boost from capital rotation after many years in the wilderness," he said. "Valuations look appealing in both sectors, and, especially in healthcare, M&A activity is poised to accelerate while earnings improve in 2026 despite regulatory risks."

Individual investors are overwhelmingly bullish on AI in 2026

Optimism around artificial intelligence is one of the strongest signals from The Motley Fool’s 2026 Investor Outlook and Predictions Report.

• Nearly two-thirds of individual investors (65%) say they have a positive outlook on AI and AI-related stocks in 2026, while just 10% have a negative outlook.
• Optimism is even stronger among younger investors: 71% of Gen Z and 69% of millennials are bullish on AI compared with 58% of Gen X and 52% of baby boomers.

Among investors who already own AI stocks, 81% have a positive outlook for AI stocks in 2026 and beyond, and only 4% are pessimistic. By contrast, investor sentiment is far more mixed among those who don’t own AI stocks, with 34% expressing only neutral sentiment about AI stock performance and 16% expecting AI investments to disappoint.

This divide suggests that firsthand exposure to AI companies, whether through semiconductors, software, or infrastructure, has reinforced confidence in the technology’s ability to generate strong market returns – or, at a minimum, that confidence in AI stocks among owners of them has not wavered.

"AI has been a driving force in the market for the past three years, so those who have witnessed a cycle of success with AI-themed investments are drawing their optimism from experience," Sharma said. "AI will continue to be a primary force in the markets in 2026, both for its disruptive potential, as we've already seen early this year, and for the tailwinds it will likely create in various industries and market sectors."

The Motley Fool’s AI Investor Outlook Report similarly found that AI investors are more comfortable riding out potential short-term AI stock volatility because they’re confident the technology will deliver long-term, market-beating returns.

"But it's clear that AI's impact is somewhat diffuse, and revenue and earnings impacts are playing out over years, not quarters. So investors' desire to identify true long-term beneficiaries of this technology won't wane one bit in 2026," Sharma added.

Why investors feel bullish and what worries them

When individual investors explain why they’re optimistic about 2026, AI is at the top of the list. Forty percent cite advances in AI as a key reason for optimism, rising to 55% among AI stockholders. A quarter of respondents said capital expenditures in data centers and AI infrastructure are among their top three reasons for optimism in the market, reinforcing the view that AI is not just hype but a capital-intensive, long-duration growth cycle that will drive real productivity gains and broader economic growth.

That view isn’t limited to individual investors. Major investment firms see the same forces supporting AI investment optimism:

• Vanguard's 2026 outlook for financial markets: AI is driving a new wave of capital-intensive growth, similar to railroads or the internet. Investment in AI infrastructure could support U.S. GDP growth above most forecasts, even if the short-term labor market is soft.
• JPMorgan's (JPM +1.08%) 2026 market outlook: The AI supercycle should keep earnings growth above trend (13% to 15%) over the next two years, creating concentrated opportunities for long-term investors.
• Fidelity Viewpoints: Massive spending on the AI-driven infrastructure build-out is creating opportunities across chipmakers, utilities, energy, and other picks-and-shovels companies. While AI product monetization is in its infancy, the current infrastructure build-out lays the groundwork for future profitable applications.
• BlackRock's (BLK +0.54%) 2026 Global Outlook: AI spending is front-loaded and concentrated among a few companies, creating macro effects that could boost growth above the U.S.’s 2% trend if innovation accelerates.

Macroeconomic factors also underpin optimism. About one-third of investors cite lower inflation, potential interest rate cuts, and easing global trade tensions as reasons for confidence, signs that many expect a cooling inflation environment without a sharp economic downturn.

Optimism around AI is heavily generational. Nearly half of Gen Z (47%) and millennials (46%) see advances in AI as a reason to be bullish in 2026, compared with just 29% of Gen X and 28% of baby boomers.

That said, optimism is tempered by real concerns.

• The risk of recession (45%), inflation failing to come down (45%), and U.S. political uncertainty (41%) top the list of investor concerns.
• Other top investor worries are the labor market weakening (37%), interest rates remaining high (33%), and geopolitical uncertainty (30%), all of which could create stock market volatility.

AI investment itself is also a source of anxiety for some. While many investors expect continued upward momentum, some experts caution that elevated expectations for AI-related stocks may increase market volatility. If enthusiasm fades or innovation fails to deliver as quickly as hoped, stock prices could face sharper corrections, particularly among companies with the highest valuations.

Twenty-nine percent of survey respondents worry about AI overvaluation or hype, and notably, AI investors are more concerned about that than those who don’t own AI stocks. Vanguard's key risk for 2026 is AI optimism fading and the AI-related capex spending halting. BlackRock notes that U.S. stock valuations are near dot-com-bubble levels.

Given the potential for increased volatility, especially if AI-driven optimism fades or macroeconomic risks materialize, some investors are considering adding more defensive assets to their portfolios.

This can include increasing allocations to:

• Dividend-paying stocks
• Alternative assets that historically offer lower correlation to equities
• High-quality bonds

Portfolio rebalancing and regular risk assessment are other ways to ensure asset allocation remains aligned with long-term goals.

Beyond equities, some analysts see renewed value in fixed-income investments as a hedge against macro risks and a potential AI slowdown. For instance, Vanguard notes, "high-quality bonds (both taxable and municipal) offer compelling real returns given higher neutral rates," and the company expects bonds to provide diversification if AI-driven growth disappoints. Some investment managers are looking to international and value stocks as potential winners in a broadening tech cycle while remaining cautious on overvalued segments.

In short, long-term individual investors are optimistic about stock market growth, but they’re taking that view with an eye on short-term macro risks.

AI dominates long-term stock market optimism

Looking beyond 2026, 57% of individual investors expect artificial intelligence and AI-driven infrastructure build-out to be the dominant drivers of stock market growth over the next five years. That percentage holds essentially steady across generations, jumps to 61% among AI investors, and holds above 50% even among investors that don’t own AI stocks.

But investors aren’t solely focused on AI stocks. They're optimistic about the technologies and sectors that could benefit most from AI-driven innovation. Here's the bull case for other market sectors that investors think will deliver strong long-term returns.

• Robotics and automation (28%) as AI boosts productivity in manufacturing and logistics
• Healthcare and biotechnology (27%) through faster drug discovery and more targeted drug and gene therapies
• Cloud computing (19%) due to AI models that depend on massive compute and data storage, driving sustained cloud demand
• Quantum computing (19%) advances could potentially process certain problems exponentially faster, removing bottlenecks that cap AI progress
• Energy infrastructure and electrification (23%) as data centers, grid upgrades, and power generation scale to meet demand
• Cybersecurity (14%) as AI opens up a new vector for cyber vulnerabilities and a new tool to develop new methods to exploit vulnerabilities and new products to improve defenses

Sharma suggests that individual investors maintain a balanced view of AI's potential to disrupt established industries, with benefits or costs for shareholders.

“At the outset of 2026, we're already seeing acceleration in competition between major model providers to provide extremely versatile tools and agents to enterprise companies, and this is adversely affecting Software-as-a-Service business models, " he said, referencing the volatility that rocked the industry in early February.

"This makes the search for manufacturing and industrial companies, which are less vulnerable to such disruption, all the more appealing. So for individual investors, themes like robotics and automation will likely loom large in the coming years," Sharma added. "I expect these themes to support market advances, and for those interested, investment either in providers of robotics and automation or companies that can benefit from them may make sense today over a five-year holding period."

Given how quickly AI breakthroughs can occur and how quickly valuations can shift, investors may consider a flexible, broad approach adaptable to changing market cycles. For example, keep in mind both sectors and asset classes that are poised to benefit from long-term trends, such as infrastructure, healthcare innovation, or clean energy, which may be supported by AI-driven demand. At the same time, maintaining exposure to high-quality companies with strong balance sheets, which can better withstand periods of volatility or economic uncertainty, could still yield strong returns.

Are AI data centers set to drive energy-sector returns?

With roughly a quarter of respondents (23%) eyeing the energy sector to deliver market-beating returns over the next five years, it's worth asking what drives their optimism. David Meier, Senior Investment Analyst at The Motley Fool, sees the AI-driven infrastructure build-out as a major driver.

"The bulk of the strong investor focus on the energy sector likely comes from the rising demand for power generation from data center construction trends," Meier said. "The rest of the focus comes from the need to continue to upgrade our electrical grids, the need to replace older and 'dirtier' forms of power generation (e.g., converting coal-fired plants to natural gas-fired plants), and the continued advancement of newer, cleaner technologies (e.g., fuel cells becoming a more economically viable form of generation)."

Meier thinks three areas of the energy sector are poised for growth if the AI build-out continues:

• Gas turbines for delivering additional short-term demand
• Nuclear and small module reactors (SMRs) to build long-term, reliable, clean baseload
• Solar combined with energy storage as another affordable, relatively quick solution to meet rising demand

"The backlog for a natural gas-fired industrial gas turbine has stretched out to five to seven years. Essentially, gas turbines are sold out for that time period, benefitting companies like GE Vernova (GEV +1.57%), Siemens, and others," Meier said. "In addition, there has been a renewed emphasis on nuclear energy and small nuclear SMRs in particular. But the lead times for those sources are years also. As a result, solar plus energy storage has become a very popular stop-gap alternative."

In line with survey respondents' concerns about AI overhype and the slowing of the AI data center build-out, Meier warned, "should the demand for power generation from data centers decrease meaningfully from here, it would have a negative impact on all three areas."

Mixing AI stock optimism with Foolish investing principles

The Motley Fool’s 2026 Investor Outlook and Predictions Report paints a picture of individual investors confident in innovation, earnings growth, and long-term investment opportunities. Most expect gains, plan to stay invested, and see AI as a foundational force shaping markets for years to come.

But Foolish (with a capital "F") investors know optimism works best when paired with discipline. High expectations raise the stakes, especially in fast-moving areas like AI. Rather than concentrating portfolios around a single theme or chasing short-term momentum, long-term success has historically come from portfolio diversification, patience, and ownership of high-quality businesses with durable competitive advantages.

Historically, successful investment strategies in times of rapid technological change combined long-term discipline with adaptability. By staying focused on fundamental principles, such as diversification, quality, and risk management while remaining open to new opportunities created by innovation, individual investors can better navigate uncertainty and position themselves to take advantage of the companies that rise above the rest.

AI may lead the charge in 2026, but time, temperament, and thoughtful portfolio construction remain the most Foolish strategies of all.

Methodology

The Motley Fool surveyed 2,000 individual investors in the U.S. on January 19, 2026, via Pollfish. Results were post-stratified to generate nationally representative data based on age and gender. Pollfish employs organic random device engagement sampling, a method that recruits respondents through a randomized invitation process across various digital platforms. This technique helps to minimize selection bias and ensure a diverse participant pool.

Sources

• BlackRock (2025). “2026 Global Outlook.”
• Fidelity (2025). “Riding the AI revolution.”
• Goldman Sachs (2025). “The S&P 500 Is Expected to Rally 12% This Year.”
• JPMorgan Chase (2025). “2026 market outlook: A multidimensional polarization.”
• Vanguard (2025). "Vanguard Releases 2026 Economic and Market Outlook."
• Vanguard (2025). “Vanguard’s outlook for financial markets.”