NVIDIA plummeted overnight, institutions sold off, and retail investors went on a buying spree?

Overnight, NVIDIA's stock price plummeted, causing a sharp fluctuation in the technology sector. However, the main players behind this round of selling pressure are not retail investors—in fact, the opposite is true, as retail investors are engaging in the largest buying action in history, countering the trend, while the real sellers are institutional investors.

On Thursday, during intraday trading, NVIDIA's stock price experienced a dramatic reversal, rising 5% before rapidly falling 5%. This significant volatility directly dragged down the overall performance of large technology stocks.

However, the strong buying from retail investors is providing potential support for the market. In the first 80 minutes after the market opened, retail investors' net buying of individual stocks, including NVIDIA, reached $360 million, surpassing the total buying amount of the previous trading day ($336 million), indicating a strong risk appetite.

In stark contrast to the retail investors' counter-trend buying, Wall Street institutions dominated the selling side during this sharp fluctuation. Due to the crowded long positions in NVIDIA, the concentrated selling by institutions exacerbated the downward pressure on the stock price.

Retail Investors' Low-Price Buying Hits Record Highs

According to data from Vanda Research, during the decline in NVIDIA's stock price, the market saw the largest retail buying since 2012. In the first 80 minutes after the market opened, retail buying activity set a historical record, and the funds were not flowing in one direction, which partially explains the dramatic fluctuations in stock prices.

Vanda Research noted that despite the initial weak price movement, retail investors overall did not participate in selling. Instead, as the stock price fell, retail investors maintained a continuous net buying position throughout the trading session.

It is noteworthy that retail buying enthusiasm is not limited to NVIDIA. Vanda Research observed that on Thursday, retail activity spread to other assets, with overflow buying seen in AVGO, IGV, and SOXX. If this momentum continues, that day could become the largest day for retail buying of individual stocks in months.

Institutional Funds Dominate Market Selling

Behind the retail frenzy of buying, the real driving force of the selling is institutional investors. According to Goldman Sachs trading desk data, overall trading activity that day was at a moderate level (5/10), but the overall fund flow leaned towards the selling side by about 5%.

In terms of specific types of institutions, traditional long-only funds (LOs) tended to sell, with their main supply concentrated in macro products, information technology, consumer discretionary, and healthcare sectors, while there was buying demand in materials and communication services. Meanwhile, hedge funds (HFs) showed a more pronounced selling tendency, with most of the selling concentrated in macro products, followed by industrials and financials; their buying demand was mainly reflected in information technology (primarily short covering in the software sector), consumer discretionary, and healthcare sectors In addition, the extreme distribution of market positions has amplified the impact of this decline. According to Goldman Sachs' flow of funds experts, prior to this sell-off, the market's positioning in NVIDIA was at an extreme level (reaching 8/10). This highly crowded position means that when the trend reverses, market participants will face widespread losses