At 25 years old, Michael MacGillivray was inspired to align his investments with the growing prevalence of artificial intelligence in daily life. He quickly identified the perfect way to capitalize on this trend.
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“When you explore the world of AI, it seems every path leads to Nvidia,” said MacGillivray, who has spent thousands of dollars on Nvidia shares this year from his home in Michigan. “It’s undoubtedly been an outstanding investment.”
MacGillivray’s investments are part of the nearly $30 billion funneled into Nvidia by retail investors in 2024, as reported by Vanda Research. As of December 17, Nvidia has emerged as the most-purchased stock among retail traders, surpassing all other equities this year.
Retail investors have poured nearly twice as much into Nvidia as into the SPDR S&P 500 ETF Trust (SPY), which tracks the U.S. stock market’s broad benchmark. Nvidia is on track to dethrone Tesla as the top retail investor pick of 2024, after Tesla claimed the title in 2023. Vanda’s methodology calculates net flows for each security by subtracting total outflows from inflows.
“Nvidia has managed to steal the spotlight from Tesla, largely due to its impressive price performance,” said Marco Iachini, senior vice president at Vanda Research. “The results speak volumes.”
Soaring Success
Nvidia’s rise has been nothing short of extraordinary. Over the past year, it has captivated investors of all kinds. Recently, the AI powerhouse was added to the prestigious Dow Jones Industrial Average, where it has become the top performer in the 30-stock index for 2024.
Despite some turbulence in December, Nvidia’s stock—part of the so-called “Magnificent Seven” tech group—is set to end 2024 with a gain exceeding 180%. This massive surge has elevated Nvidia into an elite class of companies with market valuations surpassing $3 trillion, making it the second most valuable U.S. company.
Consequently, Nvidia now occupies a more significant role in the average retail investor’s portfolio. According to Vanda, Nvidia’s weight in the typical retail portfolio has risen from 5.5% at the start of the year to over 10%, making it the second-largest holding for retail investors, just behind Tesla. Moreover, the net retail inflows into Nvidia in 2024 are over 885% higher than those recorded three years ago.
“Nvidia stands out for how rapidly retail investors have become a substantial part of its ownership base,” noted Gil Luria, head of technology research at D.A. Davidson. “Its rise has been nothing short of remarkable.”
One of these retail investors is Genevieve Khoury, a social media marketer who began buying Nvidia shares in 2022 at her father’s suggestion. Her father, a technology professional, advised her to invest in the company. Khoury plans to hold onto her shares until she can use the returns for a significant purchase, like a home.
“It just kept climbing higher and higher,” said the Los Angeles-based investor. “I’m holding on for the long haul.”
A Phenomenal Year
Retail investment in Nvidia has tended to spike around its earnings announcements, according to Iachini. Another surge occurred in August during a market-wide selloff, offering investors a buying opportunity.
Although Nvidia’s momentum has slowed slightly in recent months, with its valuation cooling compared to earlier in the year, the stock has reached more “balanced” and “sustainable” levels, said Luria.
Despite this, many investors, like recent college graduate Prajeet Tripathy, remain confident in Nvidia’s leadership in AI and its innovation-driven approach. “I believe it will continue rising exponentially,” Tripathy stated.
Investor enthusiasm for Nvidia has even extended beyond digital platforms, with fans gathering for a watch party in New York City in August to mark one of Nvidia’s earnings reports. This event came shortly after the company’s 10-to-1 stock split, a strategy often aimed at attracting retail investors.
Even with its substantial retail ownership, Nvidia’s valuation has not experienced the same price-to-earnings inflation as Tesla and Palantir, according to Luria. However, Brian Colello, an equity strategist at Morningstar, pointed out that Nvidia’s stock remains volatile for a company of its size, showcasing the impact retail traders have on price fluctuations.
“It’s astonishing to see a company this large experience such dramatic price swings,” Colello remarked.
Looking Ahead
For the second consecutive year, a single stock has surpassed the SPDR S&P 500 ETF Trust in net retail flows. While this trend reflects retail investors chasing gains in mega-cap tech stocks, Iachini believes it does not signal a move away from safer index funds.
Interestingly, Nvidia’s retail appeal lacks the charismatic leadership often associated with companies like Tesla. Jensen Huang, Nvidia’s CEO, is known for his signature leather jacket but doesn’t command the same cult-like following as Tesla’s Elon Musk, Iachini observed.
Meanwhile, other stocks, such as Palantir, are gaining popularity among retail investors. Palantir’s CEO, Alex Karp, recently thanked small-scale investors in a video message, further solidifying the company’s connection to the retail crowd.
Palantir has been one of the most-purchased stocks of late, with Khoury adding it to her portfolio on a friend’s recommendation. She hopes it follows Nvidia’s trajectory, enabling her to boast about her investment acumen.
“People doubted my knowledge in college,” Khoury said, reflecting on her investing journey. “But I’m proud to say I own Nvidia. My portfolio probably looks better than theirs.”
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