Investors rediscover a taste for extremely speculative stocks as market rips higher in April

By Joseph Adinolfi

The 'rolling momentum trade' is powering on

Speculative stocks have been flying high once again in April.

The "Magnificent Seven" tech stocks are finally riding high once again in April after a months-long bout of underperformance.

That has the popular Roundhill Magnificent Seven ETF MAGS that tracks the seven megacap companies up 12.7% in April, according to FactSet.

Semiconductor names like Broadcom (AVGO), Advanced Micro Devices (AMD) and Micron Technology (MU) have been killing it as well. Smaller, high-quality semiconductor names like Applied Optoelectronics (AAOI) and Credo Technology Group (CRDO) also share space on the list of April's top performers in the Russell 3000 RUA, alongside more speculative plays, such as Avis Budget Group (CAR), which has been driven sharply higher by a punishing short squeeze, according to Dow Jones Market Data.

Yet the real winners of the April stock-market rebound - at least, so far - are in the smaller and far more speculative camp.

The outperformance isn't quite as stark nor as widespread as what investors witnessed back in the spring of 2025, as the market rocketed back from the April tariff tantrum. Back then, shares of unprofitable companies in the small-cap Russell 2000 RUT handily outperformed profitable ones to a degree rarely seen.

But that hasn't stopped many veterans of the 2025 "story stock" boom from seeing a big pickup this month as the broader market has come roaring back from March's grind lower. Quantum stocks, including Rigetti Computing (RGTI) and IonQ (IONQ), have seen big gains. So have nuclear-power names Oklo (OKLO) and Bloom Energy (BE). But Rigetti, IonQ and Oklo shares were still sitting on year-to-date losses.

Many other speculative names - penny stocks including Beyond Meat (BYND) and meme favorites Opendoor (OPEN) and Kohl's (KSS) - also have tallied big gains this month.

For a certain subset of momentum-chasing investors, betting on more speculative stocks has turned into a real money-maker this month.

"The retail impulse to bid up these names definitely says something about risk appetite," said Ross Mayfield, an investment strategist at Baird Private Wealth Management.

In the past, when shares of unprofitable companies have left more solidly profitable peers in the dust, investors have referred to the phenomenon as a "dash for trash." Steve Sosnick, chief strategist at Interactive Brokers, said he didn't think this latest episode was quite as deserving of the label.

To be sure, some extremely speculative names like Allbirds (BIRD) - which recently offloaded its footwear business and announced a pivot to AI - have made it to Interactive Brokers' list of most-popular tickers from the past week. But recent lists have been "nowhere near as sketchy" as what investors saw at times last year.

See: Allbirds' AI pivot sends its stock soaring nearly 600%. We've seen this movie before.

Also, the S&P Small Cap 600 SML has slightly outperformed the Russell 2000 so far in April, suggesting that investors have continued to favor higher-quality names.

A 'rolling momentum trade'

As bitcoin (BTCUSD) attempts to slowly claw out of the latest crypto winter, and precious metals like gold (GC00) and silver (SI00) continue to chop sideways after a parabolic run higher that began late last year, investors are seizing once again on risky bets in the stock market.

According to Jay Hatfield, CEO of Infrastructure Capital Advisors, investors in search of the next big momentum trade are gravitating back toward speculative stocks following a months-long break.

"They did crypto for a while, then that stopped working. Then they did metals for a while, and that stopped working. And so you get these rolling momentum trades," Hatfield told MarketWatch.

Data from Vanda Research showed that individual investors have only started to wade back into large individual stocks like Nvidia (NVDA) and Tesla (TSLA) after initially hesitating to buy the dip last month.

U.S. stocks finished lower on Tuesday following reports that Vice President J.D. Vance wouldn't be traveling to Islamabad for another round of talks with the Iranian delegation. But shortly after the closing bell, President Donald Trump announced another cease-fire extension to allow the U.S. and Iran more time to come up with a deal. If no deal is reached, Trump has threatened to unleash an intense bombing campaign targeting Iran's civilian infrastructure.

The S&P 500 SPX finished nearly 1% lower Tuesday, and many speculative names saw even bigger declines. The Nasdaq Composite COMP and the Dow Jones Industrial Average DJIA also sold off.

-Joseph Adinolfi

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04-22-26 0801ET