Nvidia is seeing an “extraordinary” influx of retail investor dollars as investors flock to its AI darling

When Michael MacGillivray noticed that artificial intelligence was becoming more pervasive in everyday life, the 25-year-old wanted his investments to reflect this. It didn't take long to figure out how he wanted to capitalize on this trend.

“Whenever you look at artificial intelligence, it feels like all roads lead to it Nvidia” said MacGillivray, 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 nearly $30 billion pumped into Nvidia by ordinary investors this year, according to data from Vanda Research. This made it the most purchased asset by retail investors online in 2024 as of December 17.

Nvidia recorded almost double the amount of net proceeds from this group compared to SPDR S&P 500 ETF (SPY)which tracks a broad benchmark for the US stock market. He is also on the way to dethronement Teslaa favorite of retail investors that made money the most frequently purchased title in 2023. (The company calculates net flows for each security by subtracting its total outflows from its inflows.)

“We found that Nvidia stock stole the show for Tesla due to its impressive price growth,” said Marco Iachini, senior vice president of Vanda. “The performance speaks for itself.”

This is the latest feather in the cap for Nvidia. The artificial intelligence titan has been delighting investors both large and small for over a year. Chip manufacturer gained entry to highly valued Dow Jones Industrial Average last month and is by far the best performer of the 30-cap index in 2024.

Despite difficult quotations in December, “The Magnificent Seven” stocks are expected to end 2024 higher by more than 180%. This rapid growth placed the company's shares in an elite group of companies with such market capitalization exceed $3 trillion. Nvidia is now the second most valuable company in the USA

Naturally, the increased interest in Nvidia's shares has made the company's shares play a greater role in the average investor's portfolio. Vanda data shows Nvidia has more than 10% of the typical mom-and-pop investor's portfolio share, up from just 5.5% in early 2024. It is now the average retail investor's second-largest holding, ranking slightly behind Tesla.

Additionally, Nvidia's net retail revenues in 2024 are more than 885% greater than the amount recorded just three years earlier.

“What really stands out about Nvidia is how quickly retail investors became such a large part of the stake,” said Gil Luria, head of technology research at investment bank DA Davidson. “The climb was amazing.”

One of these individual shareholders is Genevieve Khoury, a social media marketer. She first started buying shares in 2022 at the urging of her dad, who works in the tech industry. Khoury plans to stay on his shares until he can save up for a down payment on a home or other significant purchase.

“It just kept getting higher and higher,” the Los Angeles resident said. – I just hold it.

According to Vanda's Iachini, inflows have tended to surge this year amid Nvidia's earnings reports. Individual investors also bought during the early August decline, which coincided with: wider market sale.

Of course, the herd's tributaries have cooled off to some extent as they have lost some steam. DA Davidson's Luria noted that shares were more expensive six months ago than in recent sessions.

Even as Nvidia continued to beat Wall Street's earnings expectations, they didn't beat estimates enough to continue its rapid share price rally, Luria said. Now he said the stock has reached a more “sustainable” and “reasonable” level.

Despite this recent volatility, retail investors like Prajeet Tripathy remain optimistic about the company's leadership in AI and are focused on innovation. “I think it will grow exponentially,” said Tripathy, a recent college graduate.

While investing is largely a digital activity, market participants' love for Nvidia has spilled over into the real world. Several people gathered in New York in late August for a All right–documented watch party centered around Nvidia's earnings report. This event occurred within a few months of the stock exchange listing Split 10 to 1which is usually intended to encourage retail investors.

While Nvidia's retail share is significant, this factor has not caused its price-to-earnings ratio to multiply in the same way that it did for Tesla and Palantir– Luria said. Still, Morningstar equity strategist Brian Colello said Nvidia is experiencing “pretty significant” volatility for a stock of its size, which may underscore the role retail investors can play in shaping stock prices.

“Sometimes it's jaw-dropping that a company this big can see such a big change in stock price in one day,” Colello said.

2024 marks the second year in a row that a single stock outshined the SPDR S&P 500 ETF Trust in terms of net flows. However, according to Iachini, significant inflows of funds into ETFs may dispel any fears that investors are abandoning broad index funds that are considered safe investments. The last two years of strong inflows into tech companies' megcap may instead reflect traders' pursuit of ongoing bull marketIachini said.

Despite its high 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 “godlike” personality that could attract the attention of retail investors, Iachini said. He cited Tesla CEO Elon Musk as an example, who made a splash for his company this year social support President-elect Donald Trump during the campaign.

Looking ahead, Palantir gained popularity among retail customers in the fourth quarter and could be a favorite in the new year, Iachini said. Software stocks were the ninth most purchased security in 2024, beating out AmazonAlphabet and Microsoft, according to Vanda data.

Palantir CEO Alex Karp he thanked small investors during a video released on Sunday, which took place against a snow-covered background. “I am extremely grateful to all the individual investors who have taken the time and the opportunity and had the courage to look beyond the conventional, rusty and caustic platitudes,” Karp said in the video, wearing reflective goggles and holding ski poles.

Fittingly, Palantir was recently picked up by Khoury, a social media marketer in California, on the advice of a friend. Khoury hopes to achieve Nvidia-level success so she can brag to friends who think they know more about investing than she does. So far, things are going well: in 2024, the company's shares have skyrocketed to nearly 380%, making them the best on the market S&P500 since the beginning of the year.

“There were many times in college when 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'm sure you do, I don't know what I'm talking about, but I have Nvidia.”

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