FOMO in AI and tech stocks is keeping the average investor off the sidelines

• Vanda Research said Thursday that “AI and technology FOMO seems to be starting” among retail investors.
• Net inflows from the group hit a three-month high of $1.48 billion in trading on Wednesday.
• Investors were expanding their purchases of AI-related stocks beyond large-cap stocks.

Vanda Research said on Thursday that the rally in AI and tech stocks could be driving retail investors away from the stock market as fears of missing out on buys have set in.

The snapshot was taken on the 1st, but retail investors appeared to have “confidently” bought a dip in Wednesday’s trading, the company wrote. Net inflows hit a three-month high of $1.48 billion.

Mr. Vanda said the average investor is starting to follow the boom in tech stocks, broadening their buying beyond AI-sensitive stocks and blockbuster stocks such as Palantir, Marvell and UIPath.

At the center of the AI ​​investment frenzy is chip maker Nvidia, which has a valuation of over $1 trillion this week. Shares are up about 160% this year.

In a memo, Banda’s senior vice president of research, Marco Iachini, said in a memo that “AI and technology FOMO seems to be starting” after the retail downturn since the end of February.

But he warned that profit-taking could put downward pressure on some of the market’s smaller, best-performing AI stocks, such as C3.ai. The company’s shares plunged more than 20% on Thursday after overwhelming financial guidance to investors. C3.ai shares are up 258% year-to-date ahead of its fourth-quarter earnings report.

Banda said last week that its internal U.S. stock positioning showed retail investors weren’t jumping full steam ahead on the AI ​​investment boom. Economic concerns, including the deadlock in Washington over raising the debt ceiling, appear to be cautious.

“The past week has set things up fairly well, resulting in strong retail traffic on Wednesday,” Banda said on Thursday.