Nvidia sees ‘significant’ inflow of retail investor dollars as traders flock to AI darling

As Michael McGillivray saw artificial intelligence becoming more ubiquitous in everyday life, the 25-year-old wanted his investments to reflect that. It didn’t take him long to figure out how he wanted to play the trend.

“Whenever you look at AI, it seems like all roads lead to Nvidia” said McGillivray, who has spent thousands of dollars on stocks this year from his home in Michigan. “It was definitely a great investment.”

MacGillivray’s purchases have contributed to nearly $30 billion poured into Nvidia by ordinary investors this year, according to data from Vanda Research. That made it the most-bought equity by retailers on the web in 2024, as of December 17.

Nvidia has seen almost double the size of net inflows from this group compared to SPDR S&P 500 ETF Trust (SPY)which tracks the broad benchmark for the US stock market. He is also about to be dethroned Teslathe favorite retail investor who won the most bought title in 2023 (The firm calculates the net flows for each security by subtracting the total outflows from the inflows.)

“Nvidia turned out to be the one stock that stole the show from Tesla due to its impressive price gains,” said Marco Iacini, senior vice president at Vanda. “The performance speaks for itself.”

This is the latest feather in Nvidia’s cap. The AI ​​titan has been courting investors big and small for over a year. The chip maker received admission of the highly valued Dow Jones Industrial Average last month and is the best-performing index of the 30 stock markets for 2024 so far.

Despite volatile trading in December, “The Magnificent Seven” shares are tracked to end 2024. by more than 180%. That surge has propelled the stock into an elite group of market-cap companies exceed $3 trillion. Nvidia is now the second most valuable company in the USA

Naturally, this pressure on Nvidia stock has resulted in the stock playing a larger role in the average investor’s holdings. Vanda’s data shows Nvidia has a weight of more than 10% in the typical trader’s portfolio, up from just 5.5% at the start of 2024. It is now the second-largest holding by the average retail investor, just behind Tesla.

Also, Nvidia’s retail influx into the network in 2024. is more than 885% greater than the amount seen just three years ago.

“Nvidia really stands out in terms of how quickly retail investors have become such a big part of the ownership stake,” said Gil Luria, head of technology research at DA Davidson, an investment bank. “The climb was remarkable.

One of those individual shareholders is Genevieve Khoury, a social media marketing specialist. It first started buying shares in 2022. on the recommendation of his father, who works in the technology sector. Khoury plans to sit on his stock until he can cash in a down payment on a home or another major purchase.

“It just kept going up and up and up,” the Los Angeles resident said. “I’m just holding it.”

Inflows have tended to pick up this year around Nvidia’s earnings reports, according to Vanda’s Iachini. Retail investors also bought during a dip in early August that coincided with a selling out to a wider market.

Certainly the stock inflow has cooled somewhat as it has lost some steam. DA Davidson’s Luria noted that the stock was more expensive six months ago than in recent sessions.

Although Nvidia continued to beat Wall Street’s earnings expectations, it didn’t beat forecasts enough to continue its rapid share price gains, Luria said. Now he said the stock has reached more “balanced” and “reasonable” levels.

Despite this recent volatility, individual investors like Prajeet Tripathy remain optimistic about the company’s leadership within AI and focus on innovation. “I think it’s going to continue to grow exponentially,” said Tripathi, a recent college graduate.

Although investing is largely a digital activity, market participants’ love for Nvidia has spilled over into the real world. Several gathered in New York in late August for good–documented viewing party centered around Nvidia’s earnings report. This event came within months of the actions 10 to 1 splita move usually made to incentivize retail investors.

Although Nvidia’s retail ownership is significant, this factor has not boosted the price-earnings ratio to the same extent as Tesla and PalantirLuria said. However, Morningstar equity strategist Brian Colello said Nvidia has “fairly significant” volatility for a stock its size, which could highlight the role that retailers can play in driving share prices.

“It’s scary sometimes that such a big company can have that much movement in its stock price on any given day,” Colello said.

2024 marks the second year in a row that a stock has eclipsed the SPDR S&P 500 ETF Trust by net flows. However, significant inflows into ETFs may assuage any concerns that investors are abandoning broad index funds considered safe investments, according to Iacini. The past two years of high flows in megcap tech names may instead reflect traders chasing continuing bull marketYachini said.

Despite the strong returns, Iacini said, Nvidia could be a surprising choice for the typical home investor. Despite Nvidia CEO Jensen Huang’s signature leather jacket, the company lacks a “god-like” personality that could attract the attention of retail investors, Yacini said. As an example, he pointed to Tesla CEO Elon Musk, who made waves this year for his public support of President-elect Donald Trump on the campaign trail.

Looking ahead, Palantir gained traction with retailers in the fourth quarter and could be a favorite in the new year, Yacini said. Software stocks are the ninth most bought security on the balance sheet in 2024, overtaking AmazonAlphabet and Microsoft, according to Vanda.

Palantir CEO Alex Karp thanks the small investors during a video posted on Sunday against a snowy backdrop. “Extremely grateful to all of you individual investors who took the time and the opportunity and had the courage to look beyond the conventional, rusty, rusty platitudes,” Karp said in the clip while wearing reflective goggles and clutching ski poles.

Appropriately enough, Palantir was one recently picked up by Khoury, the California-based social media marketer, on the advice of a friend. Khoury is hoping for the likes of Nvidia so she can retain bragging rights with acquaintances who believe they know more about investing than she does. So far so good: The stock has jumped nearly 380% in 2024, making it the best performer in S&P 500 year to date.

“A lot of times in college, people would try to talk me out of it like I didn’t know what I was talking about,” said Khouri, who graduated this year with a degree in finance. “I’m like, sure, yeah, I don’t know what I’m talking about, but I do have Nvidia.”

“My portfolio probably looks better than yours,” she said.