As humans, we all occasionally grapple with ‘FOMO’, the fear of missing out – the sense that others are sharing in some beneficial experience or information and the panic to join in or risk losing status, connections or opportunities.
Investors struggle with FOMO in their professional lives, too, often buying stocks not because they make financial sense, but because they are trending or have delivered large returns in the past. This approach, prioritising vision over technical analysis, has been dubbed ‘FOMO-investing’.
What can go wrong?
Business history books are filled with examples of poor decision-making influenced by trend-based optimism rather than robust financial analysis. WeWork, for instance, achieved unicorn status in just three years. When its valuation peaked at $47bn (£34.4bn) in 2019, it was already recording billions of dollars in losses. The red flags were clear, but they didn’t stop capital from flooding in. Just four years later, the company filed for bankruptcy.
Even seasoned investors can succumb to FOMO, especially in today’s competitive markets, where the pressure to move quickly might outweigh the motivation to scrutinise company or transaction data. Last year, Goldman Sachs, Barclays and HSBC piled in on Stenn, a UK fintech that was valued at £700m. The startup collapsed in December 2024, after reports emerged that it had falsified its customer data.
What fuels FOMO-investing?
FOMO-investing is fuelled by a mix of psychology, social and market dynamics. When investors see others making quick profits from trending assets, they feel pressure to join in before it’s too late.
Social media can amplify this effect, as stories of overnight wealth and viral success create a sense of urgency and scarcity. The fear of being left behind can override rational analysis, leading investors to chase hype-driven opportunities, often at inflated prices, without fully considering the risks.
When enthusiasm for the next big idea outweighs cautious analysis, a mob mentality can emerge. It takes only one top-tier investor to lend a gloss of legitimacy to a new company. If a prominent lender takes a plunge, others may quickly follow suit.
AI FOMO-investing
Generative AI has become the latest target of investors under the influence of FOMO. Keen not to keep pace with the AI “revolution”, investors are racing into deals with limited due diligence. In the first quarter of this year, 57.9% of global venture capital was invested in AI and machine-learning startups, according to data from PitchBook.
Goldman Sachs warned last year that the hype over AI might be inflated, but the debate has since resurfaced as more AI startups receive sky-high valuations before even articulating a compelling strategy, let alone recording any revenue. Take Thinking Machines Lab, a venture started by a former OpenAI executive. The firm completed a seed-funding round in July 2025, raising $2bn (£1.46bn) and achieving a $10bn (£7.33bn) valuation based on little more than the founder’s reputation – concrete information about its business plan or proposed products is still lacking.
Such vast valuations are detached from once-reliable spreadsheet measures, such as annual recurring revenue, churn and cash burn. If AI disappoints, the fallout could be severe, not just for investors but for the wider economy. Periods of intense FOMO-investing are typically followed by low equity-market returns, according to Global FOMO: The Pulse of Financial Markets Worldwide, a paper by researchers at the University of Colorado at Denver.
The lesson is simple: investment decisions grounded in discipline, not fear, are more likely to stand the test of time.
As humans, we all occasionally grapple with ‘FOMO’, the fear of missing out – the sense that others are sharing in some beneficial experience or information and the panic to join in or risk losing status, connections or opportunities.
Investors struggle with FOMO in their professional lives, too, often buying stocks not because they make financial sense, but because they are trending or have delivered large returns in the past. This approach, prioritising vision over technical analysis, has been dubbed 'FOMO-investing'.
