Nvidia sees ‘great’ influx 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 long to figure out how he wanted to play into the trend.

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

MacGillivray purchases contributed nearly $30 billion to Nvidia by regular investors this year, according to Vanda Research. As of December 17, 2024. this stock became the most bought by retail traders on the network.

Nvidia recorded almost double the net inflow from this group compared to SPDR S&P 500 ETF Trust (SPY)which tracks a broad benchmark for the US stock market. He’s also on pace to topple Teslaa favorite of retail investors who earned the most purchased title in 2023. (The firm calculates net flows for each security by subtracting its total outflows from its inflows.)

“Nvidia turned out to be the only stock that stole the show from Tesla due to its impressive price growth,” 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 exciting investors big and small for over a year. Manufacturer of microcircuits got admission to the highly respected Dow Jones industrial index last month and is by far the best performer of 2024 for the 30-stock index.

Despite rocky trading in December, “Magnificent Seven” the stock is on track to end 2024 up more than 180%. That surge has catapulted the stock into an elite group of companies with that market capitalization exceeds 3 trillion. Nvidia now appears the second most valuable company in the USA

Naturally, this push for Nvidia stock has resulted in the stock playing a larger role in the average investor’s holdings. Vanda’s data shows that Nvidia has a weighting of more than 10% in a typical mom-and-pop trader’s portfolio, up from just 5.5% at the start of 2024. It is now the second largest holding of the average retail investor, slightly behind Tesla.

In addition, Nvidia’s retail network traffic in 2024 is more than 885% higher than the amount seen just three years ago.

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

One of such individual shareholders is Genevieva Khouri, a marketer in social networks. She first started buying stocks in 2022 on the recommendation of her father, who works in the technology sector. Khouri plans to sit on his stock until he can cash in for a down payment on a home or another major purchase.

“It just kept growing and growing,” the Los Angeles native said. – I’m just holding it.

According to Vanda’s Iacchini, inflows have typically increased this year with Nvidia’s earnings reports. Retail investors also bought during the dip in early August, which coincided with a sale in the wider market.

Certainly, the inflow of stocks has cooled to some extent as they have lost a bit of steam. DA Davidson’s Luria noted that shares were more expensive six months ago than in recent sessions.

While Nvidia continued to beat Wall Street’s revenue expectations, it didn’t beat estimates enough to continue its rapid share price gains, Luria said. Now, according to him, the shares have reached a more “balanced” and “reasonable” level.

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

Although investing is primarily a digital activity, market participants’ love for Nvidia has spilled over into the real world. Several gathered in New York at the end of August for a good–documented watch the party around Nvidia’s earnings report. This event took place a few months after the action 10 to 1 splita move that is usually taken to incentivize retail investors.

While Nvidia’s retail ownership is significant, that factor hasn’t pushed the price-to-earnings ratio higher in the same way that it has for Tesla and Palantir– said Luria. However, Morningstar equity strategist Brian Colello said Nvidia has “fairly significant” volatility for a stock of its size, which could highlight the role of retail traders in driving the stock up.

“Sometimes it’s mind boggling that a company this big can have such a big move in its stock price on any given day,” Colello said.

2024 marks the second year in a row that one stock eclipsed the SPDR S&P 500 ETF Trust in net flows. However, according to Iacini, the strong inflows into ETFs could allay any concerns that investors are abandoning broad index funds, which are considered safe investments. The past two years of high inflows into megcap tech names may instead reflect that traders are chasing the bull market continues– said Yachini.

Despite its high yield, Iacini said, Nvidia could be a surprising choice for the average 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, Iacini said. As an example, he pointed to Tesla CEO Elon Musk, who made waves this year for him public support of President-elect Donald Trump during the campaign.

Looking ahead, Palantir gained traction with retailers in the fourth quarter and could be a favorite in the new year, Yachini said. In 2024, software stocks were the ninth most purchased securities AmazonAlphabet and Microsoft, according to Vanda.

CEO of Palantir, Alexey Karp thanked small investors during a video posted on Sunday against a snowy background. “I’m very grateful to all of you individual investors who took the time and the opportunity and had the courage to look past the usual, rusty, crusty platitudes,” Karp said in the clip, donning reflective goggles and holding ski poles.

Appropriately enough, Palantir was one of the recent pickups by Khoury, a California-based social media marketer, on the advice of a friend. Khouri is hoping for Nvidia-like success so she can brag to acquaintances who think they know more about investing than she does. So far so good: The stock has soared nearly 380% in 2024, making it the best performer in S&P 500 since the beginning of the year.

“A few times in college, people tried to talk to me about it like I didn’t know what I was talking about,” said Khoury, who graduated this year with a degree in finance. “I think so, I don’t know what I’m talking about, but I have Nvidia.”

“Probably,” she said, “my portfolio looks better than yours.”