Abstarct: The present study aims to investigate the impact of the perception of using artificial intelligence algorithms on the perceived performance of retail investors in the Iranian capital market, focusing on the mediating role of herding behavior. This study is applied in terms of its purpose and descxriptive-survey and correlational in terms of its data collection method. The statistical population of the study consists of retail investors active in the Iranian capital market. The questionnaire was distributed to 440 individuals and 425 were returned. After data screening, 25 questionnaires were excluded due to incompleteness, straightlining, extremely short completion time, or low-quality responses, leaving 400 valid questionnaires for final analysis. The reliability of the perception of using artificial intelligence algorithms and herding behavior and the perceived performance of retail investors were obtained as 0.839, 0.892 and 0.816, respectively, all of which were higher than 0.7 and the reliability was confirmed. In order to examine the content validity, the questionnaire was provided to the university's finance professors and was confirmed. Data analysis and testing of research hypotheses were carried out using the structural equation modeling method and with the help of SmartPLS software. The empirical findings from structural equation modeling showed that the perception of using artificial intelligence algorithms with a coefficient of (0.427) and a t-statistic of (3.903) has a positive and significant effect on the perceived performance of retail investors. Also, the direct and positive effect of the perception of using artificial intelligence algorithms with a coefficient of (0.604) and a t-statistic of (7.939) on herding behavior and the direct effect of herding behavior with a coefficient of (0.402) and a t-statistic of (3.426) on the perceived performance of investors were confirmed. Finally, the mediator role test showed that herding behavior plays a positive and significant mediating role in the relationship between the perception of using artificial intelligence algorithms and the perceived performance of retail investors. The results of this study show that the use and understanding of AI-baxsed tools not only directly improves the perceived performance of retail investors, but also can lead to the improvement of their perceived performance in the Iranian capital market by intensifying or directing herding behavior.