Nvidia sees ‘significant’ influx of retail investor money as traders flock to AI darling

Michael McGillivray saw artificial intelligence become more and more pervasive in everyday life, and the 25-year-old wanted his investments to reflect that. It didn’t take long for him to figure out how he wanted to play with this trend.

“Every time I look at AI, I feel like all roads lead to it.” Nvidia“It’s definitely been a great investment,” said McGillivray, who spent thousands of dollars on stocks this year from his home in Michigan.

MacGillivray’s acquisition contributed to the nearly $30 billion that retail investors poured into NVIDIA this year, according to data from Vanda Research. As of December 17th, this made it the most purchased stock online by retail traders in 2024.

Nvidia has almost double the net inflows from this group compared to other groups. SPDR S&P 500 ETF Trust (SPY)which tracks a broad range of benchmarks for the US stock market. There is also a momentum to take away the title. teslaa popular stock among retail investors that earned the title of Most Bought in 2023 (the company calculates each security’s net flows by subtracting total outflows from inflows).

“NVIDIA turned out to be the only stock to steal the conversation from Tesla with its impressive price increase,” said Marco Iachini, senior vice president at Vanda. “The performance speaks for itself.”

This is Nvidia’s latest goal. The AI ​​giant has been attracting investors large and small for more than a year. This chip maker has a good reputation Dow Jones Industrial Average It had the best performance last month and is by far the best performer of the 30-stock index in 2024.

Despite volatile trading in December, Magnificent Seven stock is on track to end 2024 up more than 180%. This rapid rise has propelled the company’s stock into an elite group of companies with a market capitalization of over $3 trillion. Nvidia also became the second most valuable company in the US

Not surprisingly, this push into Nvidia stock has led to it playing a larger role in the average investor’s stock holdings. According to Vanda data, Nvidia accounts for more than 10% of a typical retail trader’s portfolio, up from just 5.5% at the beginning of 2024. Nvidia is now the average retail investor’s second-largest holding, just behind Tesla. .

Additionally, net retail inflows to Nvidia in 2024 will increase by more than 885% compared to just three years ago.

“NVIDIA really stands out in that retail investors are rapidly becoming a larger part of the ownership,” said Gil Luria, head of technology research at investment bank DA Davidson. Ta. “The increase was significant.”

One of those individual shareholders is social media marketer Genevieve Cooley. She first started buying stocks in 2022 at the urging of her father, who works in the technology sector. Cooley plans to keep buying stocks until he can cash out his nest egg for a down payment on a home or other important purchases.

“It just kept going up and up,” said one Los Angeles-area resident. I’m just being patient.

According to Vanda’s Iachini, inflows tended to spike this year around Nvidia’s earnings announcement. Retail investors also bought during the early August sell-off, which coincided with the broader market decline.

It is true that stock prices have lost momentum and inflows have cooled to some extent. Mr. Luria, of the Davidson DA’s office, pointed out that the stock price six months ago was higher than in recent trading.

Luria said Nvidia’s earnings continue to beat Wall Street’s expectations, but not so much that the stock continues to grow rapidly. He said the stock price is now at a more “balanced” and “reasonable” level.

Despite this recent volatility, private investors like Prajeet Tripathy remain optimistic about the company’s leadership in AI and are focused on innovation. “I think it will continue to grow exponentially,” says Tripathy, a recent college graduate.

Although the investment is primarily a digital activity, market participants’ love for Nvidia has spilled over into the real world. In late August, several people gathered in New York City for a well-documented watch party centered around Nvidia’s earnings report. The event came within months of a 10-for-1 stock split, which is typically done to encourage retail investors.

Although Nvidia’s retail ownership is significant, this factor has not driven its price-to-earnings ratio as high as Tesla’s. Palantirsaid Luria. Still, Morningstar equity strategist Brian Colello said Nvidia has “fairly high” volatility for a stock of its size, which could highlight the role retail traders can play in driving stock prices higher. He said there is.

“Sometimes it’s surprising that a company this big can have such a big swing in its stock price on a single day,” Colello said.

2024 marks the second year in a row that a single stock has outperformed the SPDR S&P 500 ETF Trust in net flows. But Iachini said the large inflows into ETFs could allay concerns that investors are shunning broad-based index funds, which are seen as safe bets. If anything, the heavy inflow into mega-cap tech stocks over the past two years may reflect traders chasing the ongoing bull market, Yachini said.

Iachini said that despite the strong returns, Nvidia could be a surprising choice for the typical stay-at-home investor. Despite Nvidia CEO Jensen Huang’s distinctive leather jacket, Iachini said the company lacks the “godlike” personality that could attract the attention of retail investors. As an example, he cited Tesla CEO Elon Musk, who made headlines this year for publicly supporting President-elect Donald Trump during the election.

Looking ahead, Iachini said Palantir gained retail attention in the fourth quarter and could be a popular stock in the new year. Software stocks are the 9th most bought outstanding security in 2024. AmazonAlphabet and Microsoft, by Vanda data.

Palantir CEO Alex Karp thanked small investors in a video posted against a snowy background on Sunday. “We are extremely grateful to all the individual investors who took the time and opportunity to have the courage to ignore the old, rusty, unfriendly platitudes,” said Karp, wearing reflective goggles. , he said in the video while holding ski poles.

Fittingly, Palantir is one of the companies recently picked up by Californian social media marketer Khoury on the advice of a friend. Cooley hopes to run a business like Nvidia’s so he can brag to friends he believes know more about investing than he does. So far so good. The stock has soared nearly 380% in 2024, making it the world’s best performer. S&P500 year to date.

“A lot of times in college, people tried to talk to me about it like I didn’t know what I was talking about,” said Corey, who graduated this year with a degree in finance. “Well, I don’t know what you’re talking about, but I have Nvidia.”

“Maybe my portfolio is better than yours,” she said.