Nvidia sees ‘tremendous’ influx of retail investor dollars as traders flock to AI darling

As Michael MacGillivray saw artificial intelligence becoming more pervasive 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 up the trend.

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

MacGillivray’s purchases have contributed to about $30 billion poured into Nvidia by everyday investors this year, according to data from Vanda Research. This has made it the most purchased equity by retail traders on net in 2024, as of December 17.

Nvidia has seen almost double the amount of net inflows from this group compared to SPDR S&P 500 ETF Trust (SPY)which follows the broad benchmark for the US stock market. It is also on the verge of dethroning Teslathe favorite of retail investors that won the most-bought 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 stole the show from Tesla due to its impressive price gains,” said Marco Iachini, senior vice president at Vanda. “The performance speaks for itself.”

It’s the latest feather in the cap for Nvidia. The AI ​​titan has been courting investors big and small for over a year. The chip maker won the much-appreciated admission Dow Jones Industrial Average last month and is, by far, the best performer of the 30-stock index for 2024.

Despite rough trading in December, the Magnificent Seven stock is on track to end 2024 up more than 180%. That growth has pushed the stock into an elite group of companies with market capitalizations exceeding $3 trillion. Nvidia has also become the second most valuable company in the US

Of course, this push in 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 share of more than 10% of the typical mom-and-pop dealer’s portfolio, up from just 5.5% in early 2024. It’s now the second-largest holding of the average retail investor , sitting just behind Tesla.

Furthermore, Nvidia’s net retail entries in 2024 are more than 885% greater than the amount seen just three years ago.

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

One of those individual shareholders 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 sit on her stock until she cashes out the nest egg for a down payment on a home or other major purchase.

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

Inflows tend to increase 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 broader selloff in the market.

To be sure, the stock has seen cold inflows to an extent as it has lost some steam. DA Davidson’s Luria noted that shares were more expensive six months ago than in recent sessions.

Although Nvidia continued to beat Wall Street’s earnings expectations, it wasn’t beating estimates enough to keep its share price up sharply, Luria said. Now, he said the stock has come to more “balanced” and “reasonable” levels.

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

Although investing is primarily a digital activity, market participants’ love for Nvidia has spilled over into the real world. Some gathered in New York City in late August for a well-documented watch party centered around Nvidia’s earnings report. That event came within months of a 10-for-1 stock split, a move typically made to incentivize retail investors.

While Nvidia’s retail ownership is significant, this factor has not pushed the price to earnings multiple in the same way that it has for Tesla and PalantirLuria said. However, Morningstar equity strategist Brian Colello said Nvidia has “fairly significant” volatility for a stock of its size, which could underscore the role that retail traders can play in driving share prices higher.

“It’s jaw-dropping at times that such a large company can have such a large movement in its stock price on any given day,” Colello said.

2024 marks the second year in a row that a single stock has eclipsed the SPDR S&P 500 ETF Trust in net flows. Still, the substantial inflows into ETFs could ease any concerns that investors are abandoning broad index funds that are considered safe investments, according to Iachini. The past two years of high entries in megcap tech names may reflect traders chasing the continued bull market, Iachini said.

Despite the strong returns, Iachini said, Nvidia may 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 might attract the attention of retail investors, Iachini said. For example, he pointed to Tesla CEO Elon Musk, who made headlines this year for his public support of President-elect Donald Trump during the campaign.

Looking ahead, Palantir gained traction among the retail crowd during the fourth quarter and could be the favorite in the new year, Iachini said. The software stock was the ninth most-bought security on balance sheet in 2024, beating out AmazonAlphabet and Microsoft, according to Vanda data.

Palantir CEO Alex Karp thanked the small-scale investors during a video posted on Sunday, which was set against a snow-covered backdrop. “So grateful to all of you individual investors who took the time and the opportunity and had the guts to move past the conventional, rusty, crusty junk,” Karp said in the clip, while sporting reflective goggles and gripping ski poles.

Fittingly, Palantir was a recent acquisition by Khoury, the California social media marketer, on the advice of a friend. Khoury hopes for a direction like Nvidia, so she can retain bragging rights with insiders who believe they know more than she does about investing. It’s doing well so far: The stock has skyrocketed nearly 380% in 2024, making it the best performer in S&P 500 from year to day.

“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 Khoury, 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 have Nvidia.”

“Maybe,” she said, “my wallet looks better than yours.”