As artificial intelligence (AI) increasingly permeates daily life, many young investors are keen to capitalize on this trendAmong them is 25-year-old Michael McGilvray from Michigan, who recently invested thousands of dollars in NVIDIA, the chip maker synonymous with AI technology“Whenever you see artificial intelligence, it seems all roads lead to NVIDIA,” McGilvray remarked, a sentiment echoed by numerous retail investors riding the AI wave this year.
The impact of this fervor is evident in the staggering total of nearly $30 billion poured into NVIDIA by everyday investors, as reported by Vanda ResearchAs of mid-December 2023, NVIDIA overtook all other stocks to become the most net bought stock among retail traders for 2024, showcasing its dominance in the investment landscape.
When compared to broader market indices like the SPDR S&P 500 ETF Trust, NVIDIA's net inflows from investors nearly doubled those seen by such funds
Moreover, it appears poised to usurp Tesla’s long-held position as the favorite stock among retail investors, with many viewing the chip manufacturer as a safe bet in a volatile market.
“NVIDIA has kind of stolen some of Tesla’s thunder; its price increases are impressive,” said Marco Iachini, a senior vice president at Vanda ResearchThis commentary underscores a significant shift in investor sentiment, highlighting the chip company's remarkable performance over the last few years as AI gains traction across various sectors.
As a member of the so-called "Magnificent Seven"—a group of tech stocks leading the market’s recent surge—NVIDIA has become the darling of investors from all walks of lifeThe company made headlines last month when it was included in the prestigious Dow Jones Industrial Average and is currently one of the best-performing stocks in the famed index for 2024.
Despite some fluctuations in December trading, NVIDIA's stock price is projected to soar more than 180% by the end of 2024, propelling it into the ranks of elite companies with valuations surpassing $3 trillion, securing its status as the second-largest company by market cap in the U.S.
The stock’s meteoric rise has led to its prominence in retail investor portfolios, with Vanda Research finding that NVIDIA now constitutes over 10% of a typical retail trader's holdings, up from just 5.5% at the beginning of the year
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It is now the second most held stock among retail investors, trailing only Tesla.
Additionally, net retail inflows into NVIDIA stocks for 2024 have surged by over 885% compared to three years prior, indicating strong and growing interest from individual investors.
“NVIDIA stands out for how rapidly it has become a significant component of share ownership among retail investorsThis surge is quite remarkable,” stated Jill Luria, an analyst at investment bank D.ADavidson.
Amid this hype, social media marketer Genevieve Cooley is one of many individual shareholders who have latched onto NVIDIA stockInfluenced by her father, who works in the tech industry, she started buying shares in 2022. Cooley has made it clear that she plans to hold onto her shares until she can cash them in for a down payment on a house or other significant purchases
“The stock price keeps going up, up, upI’m just holding on to it,” she said, reflecting the sentiments of many retail investors.
The investment community is buzzing with excitementAccording to Iachini, the influx of funds around NVIDIA's earnings report tends to spike dramatically, particularly as retail investors seized the opportunity to buy shares during a stock market dip earlier this August when the broader market was undergoing a sell-off.
However, some cooling has been noted as the stock has lost some momentum, with Luria highlighting that NVIDIA's share price six months ago was higher than its price in recent trading sessionsDespite the continued impressive earnings reports, Luria pointed out that their magnitude has not been substantial enough to sustain rapid price escalations.
Even amidst the recent fluctuations, individual investors like Praghat Tripathi maintain an optimistic outlook on NVIDIA's leadership in the AI space
“I believe the numbers are only going to grow exponentially,” Tripathi, a recent graduate, stated confidently.
The excitement surrounding NVIDIA has even found roots in physical spacesIn late August, a group gathered in New York to celebrate and discuss NVIDIA's earnings report, highlighting a growing trend where retail investors are forming communities to share their insights and strategies.
While retail holdings of NVIDIA stock are substantial, this factor hasn’t quite propelled its price-to-earnings ratio as dramatically as seen with Tesla or PalantirStrategist Brian Cotrell noted that for a company of NVIDIA's size, its volatility is “quite large,” indicating the significant role retail traders could play in driving stock prices.
“It is striking that a company of such magnitude is capable of such large price fluctuations on any given day,” Cotrell commented, shedding light on the unpredictable nature of stock trading in the context of current investor behavior.
Looking ahead, 2024 marks the second consecutive year where a single stock’s net inflow has surpassed that of the SPDR S&P 500 ETF Trust
Yet, Iachini cautioned that this influx into large-cap tech stocks might represent traders chasing the ongoing bull market while reallocating away from the perceived safety of broad index funds.
Despite the strong returns, Iachini suggested that NVIDIA might come as a surprise choice for the average domestic investor, given its CEO Jensen Huang’s apparent lack of the charismatic figure often associated with investor appeal, in contrast to the likes of Tesla’s Elon Musk.
Looking to the future, Palantir is gaining favor among retail investors and may emerge as a hot stock in the new yearAccording to Vanda Research, the software company ranks as the ninth most popular stock for 2024, placing it ahead of established giants like Amazon, Alphabet, and Microsoft.
In a recent video posted on Sunday, Palantir's CEO Alex Karp expressed gratitude towards small investors, referencing a snow-covered backdrop while highlighting their brave transition away from traditional investing norms
“Thank you so much, individual investors, for taking the time and having the courage to go beyond the conventional, rusty clichés,” Karp noted, donning reflective goggles and holding ski poles.
Coincidentally, Palantir is another stock that social media marketer Cooley purchased based on a friend's recommendationShe hopes it will mirror NVIDIA's success, allowing her to impress those around her who may deem themselves more knowledgeable about investingSo far, Palantir has performed admirably, skyrocketing nearly 380% in 2024, making it one of the best-performing stocks in the S&P 500 this year.
“Throughout college, people often tried to talk down to me as if I didn’t know what I was saying,” Cooley shared, equipped with her recent finance degree“I would say, yes, maybe I don’t know what I’m talking about, but I do have NVIDIA.”
“Perhaps,” Cooley added, “my portfolio looks better than yours.”