The numbers couldn't be more stark. In The Motley Fool's 2026 AI Investor Outlook Report, a remarkable 90% of investors polled said they will buy or hold AI stocks this year. Meanwhile, Warren Buffett—the most successful investor of the modern era—spent his final year running Berkshire Hathaway trimming positions and accumulating the largest cash pile in the company's history.

One of these groups is going to be spectacularly wrong. Understanding why they've reached such different conclusions may be the key to navigating 2026's markets.

The Retail Conviction Trade

Retail investors have never been more confident in artificial intelligence as an investment thesis. The AAII Investor Sentiment Survey shows bullish sentiment at 42.5%, well above its 37.5% historical average and elevated for the sixth time in nine weeks.

This optimism isn't unfounded. Retail stock picks have delivered remarkable returns in recent years. The WallStreetBets community's 2025 top picks—including Nvidia, Palantir, and Robinhood—generated a cumulative return of roughly 76% for the year. The subreddit's 2026 favorites span quality and growth names, led by Amazon and Alphabet alongside space and AI infrastructure plays.

"Risk appetite has returned, speculation is elevated, and retail investors are once again leaning into bold ideas," observed one market strategist. "Whether that conviction survives the first real correction of this cycle remains to be seen."

The Buffett Divergence

Against this backdrop of enthusiasm, Buffett's final moves at Berkshire Hathaway stand in sharp relief. The Oracle of Omaha didn't just fail to add AI exposure—he actively reduced his equity holdings and built cash reserves to unprecedented levels.

Buffett's skepticism wasn't hidden. In his letters and meetings throughout 2025, he expressed concern about valuations, questioned the durability of AI-driven earnings growth, and emphasized the importance of having capital available when prices become attractive. He retired leaving his successor, Greg Abel, with the most conservative balance sheet in Berkshire's history.

The Historical Pattern

Buffett has been wrong before. He famously avoided technology stocks throughout the late 1990s boom, missing massive gains before being vindicated by the dot-com crash. His caution about cryptocurrencies has looked increasingly dated as Bitcoin has become a mainstream asset. Perhaps AI is another blind spot born of generational unfamiliarity with emerging technology.

But Buffett's track record on sentiment extremes is nearly perfect. When retail investors are universally bullish and prices reflect optimistic scenarios, his instinct to step back has repeatedly proven prescient over multi-year periods.

What the Institutions Think

Wall Street's professional analysts fall somewhere between retail exuberance and Buffett pessimism. J.P. Morgan Global Research is positive on equities for 2026, forecasting double-digit gains supported by robust earnings growth. The S&P 500 has an average year-end target of 7,616 among 19 analysts surveyed—implying 10% upside from current levels.

Oppenheimer expects a third consecutive year of strong equity returns, with the rally that began in late 2022 continuing to broaden beyond mega-cap technology. Charles Schwab's strategists acknowledge elevated valuations but don't see imminent crash risk.

Yet even the bulls include caveats. "Since we're in an environment of elevated multiples and sentiment—with policy risk not subsiding anytime soon—the bar for a pullback or mini correction in the beginning of 2026 is not terribly high," warned one analyst in the Schwab outlook.

The Sentiment Indicators Flashing Yellow

Several technical measures suggest the retail bullishness may be approaching extremes that historically precede corrections:

  • Margin debt: Investors are borrowing near record levels to fund stock purchases
  • Options activity: Call buying relative to puts has reached multi-year highs
  • Cash allocations: Retail cash holdings as a percentage of portfolios are near historic lows
  • Valuation spreads: The premium investors pay for AI-related stocks has expanded even as growth rates are decelerating

None of these indicators guarantee an imminent downturn. Sentiment can remain elevated for extended periods, and momentum-driven markets can stay irrational longer than skeptics can stay solvent. But the conditions that historically precede meaningful corrections are increasingly present.

The Actionable Takeaway

For individual investors, the divergence between retail enthusiasm and Buffett skepticism isn't a signal to abandon AI stocks entirely. It's a reminder to examine your own conviction and position sizing.

Are you buying AI names because you've analyzed their businesses and believe in their long-term competitive positions? Or are you buying because prices keep going up and everyone else is bullish? The first approach has a track record of success across market cycles. The second tends to end badly when sentiment shifts.

Buffett's parting gift to investors may have been less about predicting a crash and more about modeling the discipline that builds lasting wealth: stay rational when others are euphoric, maintain flexibility when opportunities seem scarce, and never confuse price momentum with fundamental value.

The 90% of retail investors betting on AI could be right. But they'd do well to understand exactly what they're betting against.