The US stock market had another solid year in 2025. The S&P 500 gained about 18% in total — the third straight year of double-digit returns, thanks mostly to the AI hype.(1)
But dig a little deeper, and things look a lot messier for anyone trying to pick individual stocks. The gains weren’t spread around evenly. A few superstar stocks crushed it, while tons of others barely moved or even tanked.
Even inside the same industries, results were all over the map — some companies soared while others in the same group fell hard. And the whole rally? It was carried by just a handful of big names, not a wide crowd of winners.(2),(3)
As if picking stocks wasn’t tough enough already.
A small group of AI-related winners — think data storage, memory chips and semiconductors — carried much of the market, while many otherwise good companies got left behind or took big hits.
Picking the right ones was brutal. Stocks were moving way more independently than usual — monthly single-stock dispersion averaged 27.4% annualized, the third-highest reading since 2008.(4) This means stocks’ returns varied greatly from one another, even when the overall market looked positive.
Data on sector averages, top and bottom performers and company-level breadth — the percentage of stocks up versus down within each sector — underscores just how uneven the year truly was.
The broad market’s respectable return hid dramatic differences across the 11 major sectors.
Information Technology led with an average gain of 32.9%, fueled by the ongoing AI boom — especially semiconductors, memory and data infrastructure.
Communication Services followed at 18.9%, while Industrials, Utilities, Financials, Consumer Discretionary and others posted mid-teens to single-digit gains.
Rate-sensitive and defensive sectors struggled: Real Estate declined 0.64%, while Consumer Staples increased a fraction of a percent (0.22%).
These splits show how macro themes — like explosive AI spending and stubbornly high interest rates — created huge gaps between sectors.
A handful of stocks delivered jaw-dropping returns, often exceeding 200–559%:
These mega-winners were almost all in Information Technology, riding the massive demand for AI data centers, high-bandwidth memory and storage as hyperscalers poured hundreds of billions into infrastructure.(5)
The flip side was brutal:
High-valuation growth names in Financials, Communication Services, Real Estate and parts of Consumer Discretionary took the biggest hits — often because of higher rates, shifting consumer spending or competition from AI trends.(6)
Even in “winning” sectors like tech, the wrong pick could mean massive underperformance.
The most revealing number is company-level breadth — what percentage of stocks in each sector finished the year up versus down.
Even in high-breadth sectors like IT (63% up), the gap in performance was huge. A few names soared while others declined sharply. This dispersion made broad sector bets insufficient; precise selection was key.(3)
2025 was a classic year of concentration risk and theme-driven returns. The AI infrastructure boom created enormous winners, but punished mistakes harshly, especially in defensives and high-valuation growth areas.
With elevated single-stock dispersion and narrower breadth compared to 2023–2024, picking individual stocks, proved more challenging than in recent years.
For most people, passive indexing or sector ETFs (exchange-traded funds) likely outperformed active stock picking amid all this volatility. Looking ahead to 2026, the big questions are: Will the AI rally spread out more or stay concentrated in a few names? Could beaten-down areas like real estate or staples finally catch a break if rates ease?
With splits this extreme, headline market returns can be misleading. The real story — and the real challenge — is in the details. Stock picking isn’t getting easier; it’s getting harder than ever.