Nvidia sees ‘extraordinary’ dollar inflow for retail investors as traders flock to AI darling

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

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

MacGillivray’s purchases have contributed to nearly $30 billion that ordinary investors have poured into Nvidia this year, according to data from Vanda Research. As of Dec. 17, that made it the most-bought stock among online retailers in 2024.

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

“Nvidia turned out to be the one stock that kind of stole the show from Tesla because of the impressive price increase,” said Marco Iachini, senior vice president at Vanda. – The performance speaks for itself.

It is the latest flagship for Nvidia. The artificial intelligence titan has been wooing investors big and small for more than a year. Chip manufacturer received admission highly valued Dow Jones Industrial Average last month and is by far the best result of the 30-stock index in 2024.

Despite the difficult trading in December, “The Magnificent Seven” shares will end 2024 up more than 180%. That jump put the stock in an elite group of companies with market capitalization exceed 3 trillion dollars. Nvidia is now the second most valuable company in the USA

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

Additionally, Nvidia’s online retail inflows in 2024 are more than 885% higher than the amount recorded just three years ago.

“Nvidia really stands out because of how quickly retail investors have become such a big part of the ownership stake,” said Gil Luria, head of technology research at investment bank DA Davidson. – The ascent was extraordinary.

One of those individual shareholders is Genevieve Khoury, a social media expert. She started buying shares in 2022 on the recommendation of her father, who works in the technology sector. Khoury plans to sit on his shares until he cashes in his cash for a down payment on a home or other significant purchase.

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

According to Vanda Iachini, inflows have increased around Nvidia’s earnings reports this year. Small investors also bought during the dip in early August, which coincided with wider market sell-off.

To be sure, the stock has experienced a reduction in inflows to some extent as it has lost steam. Luria of the Davidson County District Attorney noted that the stock was more expensive six months ago than in recent sessions.

While Nvidia continued to beat Wall Street’s earnings expectations, it didn’t beat estimates enough to continue its rapid share price gains, Luria said. He now said the stock had come to “more balanced” and “reasonable” levels.

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

Although investing is largely a digital activity, market participants’ love for Nvidia has spilled over into the real world. Several of them gathered in New York at the end of August on good–documented watch entertainment centered on Nvidia’s earnings report. This event happened a few months after the shares 10 to 1 splita move usually made to encourage small investors.

While Nvidia’s retail ownership is significant, this factor has not multiplied the price-to-earnings ratio in the same way that it did for Tesla and PalantirLuria said. Still, Morningstar equity strategist Brian Colello said Nvidia has “fairly significant” volatility for a stock of its size, which may underscore the role that retailers can play in driving share prices.

“Sometimes it’s unbelievable that a company this big can have such a big move in its share 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 in net flows. However, the substantial inflows into ETFs may assuage any concerns that investors are abandoning broad index funds that are considered safe investments, according to Iachini. The past two years of big inflows into megcap tech names may instead reflect traders chasing for ongoing bull marketIachini said.

Regardless of the big returns, Iachini said, Nvidia can be a surprising pick for the typical domestic investor. Despite Nvidia CEO Jensen Huang’s distinctive leather jacket, the company lacks the “God-like” personality that can attract the attention of retail investors, Iachini 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 during the campaign.

Looking ahead, Palantir gained traction with the retail crowd during the fourth quarter and could be a favorite in the new year, Iachini said. Software stocks were the ninth most bought security on the balance sheet in 2024, surpassing AmazonAlphabet and Microsoft, according to Vanda data.

Palantir CEO Alex Karp thanked small investors during a video posted on Sunday that was set against a snow-covered backdrop. “I am extremely grateful to all of you individual investors who have taken the time and the opportunity, and had the courage to look beyond the conventional, rusty, old-fashioned platitudes,” Karp said in the clip, while wearing reflective goggles and holding ski poles.

Fittingly enough, Palantir was recently acquired by Khoury, a California-based social media marketer, on the advice of a friend. Khoury is hoping for success like Nvidia’s, 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 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 say, sure, yeah, I don’t know what I’m talking about, but I have Nvidia.”

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