Robinhood dominates the S&P 500! Up 241% this year, outperforming tech stocks to become the annual champion

In 2025, the US stock market saw a dramatic sector rotation, with the brightest star in the S&P 500 being a new member that joined the index less than three months ago: Robinhood (HOOD). Robinhood’s stock price has surged nearly 241% year-to-date, far outpacing all major tech stocks and becoming the best-performing stock in the S&P 500.

A miracle: 241% surge in just 3 months since joining the index

(Source: S&P Global Market Intelligence)

Robinhood’s biggest highlight in 2025 was being officially included in the S&P 500 only on September 22, yet achieving rapid growth in less than three months to outperform established tech stocks and popular AI beneficiaries. Such a “rookie king” performance is extremely rare in S&P 500 history, as new entrants typically need some time to adapt to index fund inflows and seldom top the gainers’ list in their first quarter.

Since its founding in 2013, Robinhood has been renowned for disruptive innovation, pioneering the commission-free trading model that transformed the brokerage industry’s fee structure. Its streamlined mobile interface and low-barrier trading successfully attracted a new generation of investors, rapidly expanding during the retail trading boom in the pandemic. However, since its 2021 IPO, Robinhood’s stock had languished for a long time, with the market doubting the sustainability of its business model.

Being added to the S&P 500 itself marked a major turning point. It signified that Robinhood’s market cap, liquidity, and financial stability had reached blue-chip standards. More importantly, index inclusion triggered massive buying from passive funds. ETFs and mutual funds tracking the S&P 500 manage trillions of dollars in assets and are compelled to buy Robinhood shares on the inclusion date to match their benchmark, providing strong structural support for the stock price.

In terms of market indicators, Robinhood’s Relative Strength (RS) rating reached 97 (out of 99), fully demonstrating its outperformance relative to the broader market. The RS rating is a quantitative metric comparing a stock’s performance to the overall market; a 97 rating means Robinhood outperformed 97% of S&P 500 constituents. Such extreme relative strength often signals a strong uptrend and attracts momentum traders to keep chasing the stock.

Analysts estimate the company’s earnings per share will grow 84% this year and increase another 23% in 2026, indicating continued high investor confidence in its medium-term profitability. These earnings growth expectations provide fundamental support for its high valuation. In growth stock valuation logic, as long as earnings growth can be maintained, a high P/E ratio is justified.

Prediction markets and crypto create dual growth engines

Robinhood’s most eye-catching recent strategy has been its aggressive entry into prediction markets. Users can bet on sports, social events, and more, all coexisting with traditional securities trading on the same platform. This business model, combining entertainment and investment, is somewhat controversial but has driven significant user growth, boosting platform stickiness and profitability.

The prediction market’s commercial potential was proven during the 2024 US presidential election, with platforms like Polymarket and Kalshi reaching trading volumes in the billions of dollars. Robinhood recognized this opportunity, leveraging its massive user base and regulatory licenses to quickly enter the market. For users already trading stocks and crypto on Robinhood, adding prediction markets is a natural extension, requiring no extra KYC or account opening process.

Crypto is another important growth engine for Robinhood. The company offers trading services for Bitcoin, Ethereum, and dozens of other cryptocurrencies, and significantly expanded this business in 2025. With the successful launch of Bitcoin and Ethereum ETFs, crypto has become a mainstream investment target, and Robinhood, as one of the easiest crypto trading platforms, directly benefits from this trend.

Robinhood’s Dual Growth Engines in 2025

Prediction Markets: Entering sports and event betting to boost platform stickiness and trading frequency

Crypto Trading: Benefiting from the launch of Bitcoin and Ethereum ETFs, surging retail demand for crypto trading

This diversification strategy is transforming Robinhood from a pure stock broker into a comprehensive fintech platform. When one business line faces regulatory or market challenges, others can compensate, reducing overall business risk. This business model resilience is one reason investors are willing to assign a high valuation.

The AI Hardware Trio: Exploding Demand for Storage and Memory

While Robinhood currently holds the top spot on the S&P 500’s annual gainers list, tech stocks remain the strongest group overall this year, especially hardware supply chain firms benefiting from booming AI and data center demand. Seagate Technology, founded in 1979, is one of the world’s largest hard drive manufacturers. In 2025, cloud service providers massively expanded data centers, causing enterprise-grade high-capacity hard drive demand to surge, pushing Seagate’s stock price up 209% this year.

Seagate’s success proves that even in the SSD era, traditional hard drives remain irreplaceable for high-capacity storage. AI model training generates data in PBs (petabytes), and the long-term storage needs for this massive data have renewed market interest in cheaper, larger-capacity hard drives. While a traditional hardware company, Seagate’s leadership in large-capacity storage devices makes it an essential infrastructure supplier in the AI era.

Micron Technology is a major global supplier of DRAM and NAND storage chips. In 2025, massive memory demand from AI servers and large models drove high bandwidth memory (HBM) shipments, with the stock soaring 184%. The market widely sees Micron as one of the most explosive targets in the AI infrastructure supply chain. HBM, designed for AI and high-performance computing, delivers far greater bandwidth than traditional DRAM and is a key component for AI chips like Nvidia’s H100 and H200.

Western Digital, similar to Seagate, mainly produces hard drives and SSDs and holds a significant position in enterprise storage. AI training and data center expansion have driven vast storage demand, sending its stock up 168% this year, making it another S&P 500 powerhouse in 2025.

Top 5 S&P 500 Annual Gainers

1st: Robinhood — 241% (Fintech)

2nd: Seagate Technology — 209% (Hard Drive Storage)

3rd: Micron Technology — 184% (Memory Chips)

4th: Western Digital — 168% (Storage Solutions)

5th: Palantir Technologies — 125.7% (Data Analytics)

The makeup of this list is telling: the top is a fintech innovator, the next three are AI infrastructure suppliers, and the fifth is an AI application layer company. This diversified leadership shows the 2025 bull market isn’t driven by a single theme but by multiple trends erupting simultaneously.

Palantir Overtaken, Burry’s Skepticism Fails to Hold Back Surge

Palantir, known for data analytics for governments and enterprises, still saw its stock rise about 125.7% this year, maintaining strong momentum. However, before Robinhood’s sudden explosion, Palantir had long been seen by retail and institutional investors as the symbol of a growth stock—now it finds itself surprisingly overtaken. This gap in relative performance has sparked debate over whether AI stocks have peaked.

Notably, Palantir was publicly doubted by Michael Burry, the “Big Short” prototype, but that did not prevent its stock from doubling in 2025. Burry’s arguments focused on Palantir’s high valuation and overreliance on government contracts, but the market clearly values its technological leadership in AI and big data analytics more. This divergence between professional investors and market consensus is a microcosm of the 2025 bull market.

Although Robinhood has overtaken Palantir in gains, a 125.7% annual return is still remarkable in absolute terms, beating the returns of most hedge and actively managed funds. For long-term Palantir holders, it’s a bumper year.

From a sector rotation perspective, Robinhood’s leadership marks a shift in market focus from pure AI tech stocks to fintech and infrastructure stocks that benefit from AI but have more diversified business models. This type of rotation typically occurs in the mid-to-late stages of a bull market, when early leaders become overvalued and capital looks for reasonably valued targets with strong growth potential.

AI Bubble Theory Refuted by S&P 500 Rankings

While AI has been dismissed as a bubble for a whole year, the S&P 500’s YTD performance says it all. Three of the top five directly benefit from AI infrastructure demand, Palantir is an AI application company, and only Robinhood has no direct connection to the AI theme. This composition shows that not only has the AI bubble not burst, it’s moving from hype to real application and infrastructure building.

Bubble theorists’ core argument is that AI’s commercial value has yet to be proven and massive investments may not yield corresponding returns. However, the stock performances of Seagate, Micron, and Western Digital prove that, at least on the hardware level, AI-driven demand is real and sustained. These companies’ revenues and profits are actually growing, not just built on expectations or promises.

More importantly, the breadth of this demand is expanding. Not only are AI chip makers like Nvidia benefiting, but the entire industry chain from memory and storage to networking equipment is enjoying surging AI-driven orders. This whole-industry boom is more sustainable than a single-link frenzy and harder to simply dismiss as a bubble.

While Robinhood, as the top gainer, has no direct link to AI, its success also indirectly benefits from the wealth effects of the AI era. As tech stocks soar, investor wealth increases, leading to more trading activity on Robinhood’s platform. Moreover, Robinhood itself is using AI technology to optimize its recommendation system, risk control models, and customer service—these applications, though less direct than those of hardware companies, still improve the company’s operational efficiency and user experience.