Jensen Huang, CEO of Nvidia, arrives for the inaugural AI Insight Forum at the Russell Building on Capitol Hill on September 13, 2023.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
When Michael McGillivray saw artificial intelligence becoming more prevalent 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 this trend.
“When you look at artificial intelligence, it’s as if all roads lead to it Nvidiasaid 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 contributed to the nearly $30 billion pumped into Nvidia by ordinary investors this year, according to data from Vanda Research. This makes it the most purchased stock by retail traders on the network in 2024, as of December 17.
Nvidia saw nearly twice the amount of net inflows from this group compared to SPDR S&P 500 ETF Trust (SPY)which tracks the general index of the US stock market. She is also on her way to overthrow the throne Teslaa favorite of retail investors and the most bought in 2023. (The company calculates the net flows for each security by subtracting the total outflows from the inflows.)
“Nvidia turns out to be the one stock that stole the show from Tesla due to impressive price gains,” said Marco Iachini, senior vice president at Vanda. “Performance speaks for itself.”
“Higher, higher, higher”
It’s the latest feather in Nvidia’s cap. The AI giant has fascinated investors big and small for over a year. The chip maker has gained great acceptance Dow Jones Industrial Average last month and is, by far, the best performance of the 30 stock index of 2024.
Despite a rocky December trading, Magnificent Seven stock is on track to end 2024 up more than 180%. This increase has pushed the stock into an elite group of companies whose market capitalization exceeds $3 trillion. Nvidia is now the second most valuable company in the United States
Nvidia, year to date
Naturally, this push into Nvidia stock has led to the stock playing a larger role in the average investor’s holdings. Vanda data indicates that Nvidia’s share is 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 holding by the average retail investor, marginally behind Tesla. .
Additionally, retail flows on Nvidia’s network in 2024 are 885% greater than the amount seen just three years ago.
“Nvidia really stands out in terms of how quickly retail investors have become a significant part of the ownership stake,” said Gil Loria, head of technology research at investment bank DA Davidson. “The climb was great.”
One of these individual contributors is Genevieve Khoury, a social media marketer. She first started buying stocks in 2022 on the recommendation of her father, who works in the technology sector. Khoury plans to hold on to her shares until she can get a down payment on a house or other important purchase.
“It just kept going up and up,” the Los Angeles area resident said. “I just carry it.”
“Jaw Drop”
Flows tend to rise this year around Nvidia’s earnings reports, according to Vanda’s Iachini. Retail investors also bought during the early August decline, which coincided with a broad market sell-off.
The stock has certainly seen somewhat cooler flows as it has lost some steam. DA Davidson’s Loria noted that stocks were more expensive six months ago than they were in recent sessions.
Even as Nvidia continues to beat Wall Street earnings expectations, it has not beaten estimates enough to continue rapid share price growth, Loria said. He now said the stock had reached more “balanced” and “reasonable” levels.
Despite these recent fluctuations, retail investors like Prajit Tripathi remain bullish on the company’s leadership in AI and focus on innovation. “I think it will continue to rise dramatically,” said Tripathi, a recent college graduate.
Although investing is largely a digital activity, market participants’ love for Nvidia has extended into the real world. Many of them gathered in New York City in late August for a well-documented watch party centered around Nvidia’s earnings report. The event came within months of a 10-for-1 stock split, a move typically made to incentivize retail investors.
Although Nvidia’s retail ownership is large, this factor has not pushed its price-to-earnings multiple higher in the same way as it did with Tesla and Palantir“,” Luria said. However, Brian Colello, equity strategist at Morningstar, said Nvidia has “fairly large” volatility for a stock of its size, which could underscore the role retail traders can play in driving stock prices.
“It’s amazing sometimes that a big company like this can make such a big move in stock price on any given day,” Colello said.
What retail investors want next
2024 marks the second year in a row that a single stock will outperform the SPDR S&P 500 ETF Trust in net flows. However, large flows into ETFs could ease any fears that investors will abandon broad index funds that are considered safe investments, according to Iachini. The past two years of high flows into mega-cap tech names could instead reflect traders’ pursuit of an ongoing bull market, Iachini said.
Despite the strong returns, Iachini said, Nvidia could be a surprising choice for the average at-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, Iachini said. As an example, he pointed to Tesla CEO Elon Musk, who caused a stir this year for his public support of President-elect Donald Trump during the election campaign.
Alex Karp, CEO of Palantir Technologies, stands next to the company logo before an interview with Reuters in the Alpine resort of Davos, Switzerland, on May 23, 2022.
Arend Wegman | Reuters
Looking ahead, Palantir gained traction among the retail crowd during the fourth quarter and could be a favorite in the new year, Iachini said. The software stock was the ninth most-bought stock in 2024, beating… AmazonAlphabet and Microsoft, according to Vanda data.
Palantir CEO Alex Karp thanked small investors during a video posted Sunday and set against a snow-covered background. “I am extremely grateful to all the individual investors who took the time and opportunity, and had the courage to look beyond the traditional, rusty, crusty platitudes,” Karp said in the clip, while wearing reflective goggles and holding ski poles.
Fittingly, the Palantir is one of the pickup trucks that Khoury, a California social media marketer, recently acquired on the advice of a friend. Khoury hopes to achieve Nvidia-like success, so she can retain bragging rights with acquaintances who think they know more about investing than she does. Things are going well so far: The stock is up dramatically nearly 380% in 2024, making it the best performer in the world. Standard & Poor’s 500 year to date.
“Several times in college, people tried to talk to me about it as if I didn’t know what I was talking about,” said Khoury, who graduated this year with a degree in finance. “I definitely, yeah, I don’t know what I’m talking about, but I have Nvidia.”
“My wallet probably looks better than yours,” she said.
