Jensen Huang, CEO of Nvidia, arrives at the first AI Insight Forum at the Russell Building on Capitol Hill on September 13, 2023.
Tom Williams | CQ Roll Call, Inc. | Getty Images
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 figure out how he wanted to capitalize on the trend.
“When you look at AI, it’s like all roads lead there.” Nvidiasaid 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 have helped ordinary investors pour a total of nearly $30 billion into Nvidia this year, according to data from Vanda Research. This made it the stock most frequently purchased by private investors in 2024 (as of December 17th).
Nvidia saw almost twice as many net inflows from this group compared to Nvidia SPDR S&P 500 ETF Trust (SPY)which represents the broad benchmark for the US stock market. It is also well on its way to dethroning it Teslathe retail investor favorite, which became the best-selling stock in 2023. (The Company calculates net inflows for each security by subtracting its total outflows from its inflows.)
“It turns out that Nvidia was the only stock that stole the show from Tesla due to impressive gains,” said Marco Iachini, senior vice president at Vanda. “The performance speaks for itself.”
“Up and up and up.”
For Nvidia it is the latest innovation. The AI titan has been delighting investors large and small for more than a year. The chip manufacturer achieved inclusion in the highly respected Dow Jones Industrial Average last month and is by far the best performer of the 30-stock index in 2024.
Despite bumpy trading in December, “Magnificent Seven” shares expect to end 2024 with a gain of more than 180%. This rise has propelled the stock into an elite group of companies with market capitalizations exceeding $3 trillion. Nvidia is now the second most valuable company in the USA
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Nvidia, current year
Of course, this push into Nvidia stock has made the stock play a larger role in the average investor's ownership. Vanda data shows that Nvidia has a stake of more than 10% in the typical mom-and-pop retailer's portfolio, up from just 5.5% at the start of 2024. It is now the second-largest holding by the average retail investor, falling just behind Tesla.
Additionally, Nvidia's net retail inflows in 2024 are more than 885% higher than the amount seen just three years earlier.
“Nvidia really stands out because of how quickly retail investors have gained such a large share of ownership,” said Gil Luria, head of technology research at DA Davidson, an investment bank. “The rise was remarkable.”
One of these 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 stocks until she can cash in the nest egg for a down payment on a home or other significant purchase.
“It kept going higher and higher,” the Los Angeles area resident said. “I just hold on to it.”
“Stunning”
According to Vanda's Iachini, inflows tended to rise around Nvidia's earnings reports this year. Retail investors also bought during a decline in early August that coincided with a broader market sell-off.
Of course, the stock has seen some slowdown in inflows as it has lost some momentum. DA Davidson's Luria noted that stocks were more expensive six months ago than in recent sessions.
Although Nvidia continued to beat Wall Street's earnings expectations, it didn't beat estimates by enough to continue the stock's rapid rise, Luria said. Now the stock has reached a more “balanced” and “reasonable” level, he said.
Despite this recent volatility, individual investors like Prajeet Tripathy remain optimistic about the company's leadership in AI and are focused on innovation. “I think it’s only going to continue to rise exponentially,” said Tripathy, a recent college graduate.
Although investing is largely a digital activity, market participants' love for Nvidia has extended to the real world as well. Several gathered in New York City in late August for a well-documented watch party surrounding Nvidia's earnings report. This event occurred just a few months after the 10-to-1 stock split, a move typically done to incentivize retail investors.
Although Nvidia's retail holdings are significant, this factor has not driven up the price-to-earnings ratio in the same way as Tesla and PalantirLuria said. Still, Morningstar equity strategist Brian Colello said Nvidia is experiencing “fairly significant” volatility for a stock of its size, underscoring the role that retail traders can play in driving share prices higher.
“It's sometimes mind-boggling that the stock price of such a large company can fluctuate so much on a given day,” Colello said.
What private investors want next
2024 marks the second consecutive year that a single stock has outperformed the SPDR S&P 500 ETF Trust in net inflows. However, according to Iachini, significant inflows into the ETF can allay any concerns about investors foregoing broad index funds that are considered safe investments. The high inflows into mega-tech companies over the past two years may instead be due to traders tracking the ongoing bull market, Iachini said.
Despite the high returns, Iachini said Nvidia could be a surprising choice for the typical retail investor. Despite Nvidia CEO Jensen Huang's signature leather jacket, the company lacks a “god-like” personality that can 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 publicly supporting President-elect Donald Trump during the election campaign.
Alex Karp, CEO of Palantir Technologies, poses next to the company logo before an interview with Reuters in the alpine resort of Davos, Switzerland, May 23, 2022.
Arnd Wiegmann | Reuters
Looking ahead, Palantir gained traction among retailers in the fourth quarter and could be a favorite in the new year, Iachini said. On balance, the software stock was the ninth most purchased security in 2024 and exceeded AmazonAlphabet and Microsoft, according to Vanda data.
Alex Karp, CEO of Palantir, thanked small investors in a video released on Sunday against a snow-covered backdrop. “I am extremely grateful to all the individual investors who seized the time and opportunity and had the courage to look beyond conventional, rusty, crusty platitudes,” Karp said in the clip while wearing reflective goggles and holding ski poles.
Fittingly, Palantir was recently picked up by Khoury, the social media marketer in California, on the advice of a friend. Khoury is hoping for Nvidia-like success so she can continue to brag to acquaintances who think they know more about investing than she does. Things are going well so far: the stock is up almost 380% in 2024, making it the best performer in the world S&P 500 the course of the year so far.
“In college, people tried to talk to me about it several times like I didn't know what I was talking about,” said Khoury, who graduated this year with a degree in finance. “I’m like, yeah, I don’t know what I’m talking about, but I have Nvidia.”
“Probably,” she said, “my portfolio looks better than yours.”