AI concept stocks forming a bubble? Far from it! Retail investors have not yet fully entered the market.
Vanda's analysis of trading data shows that, despite the media hype, the frenzy around artificial intelligence is relatively mild compared to the meme stock bubble.
Recently, concerns about the debt ceiling have been intertwined with excitement about artificial intelligence, causing Wall Street to be confused.
Citigroup's global asset allocation team, led by Alex Saunders, said, "Although the price trend of AI-related stocks is obviously extreme, we still believe that it is too early to give up this trend before AI develops to a disappointing level."
Some commentators have been cautious: "We may be seeing the formation of a bubble in AI-related stocks. Although no one questions the potential of AI, valuations seem to have gotten ahead of themselves and may soon adjust," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Retail investors have not fully entered the market
"However, many investors have not increased their exposure, which not only indicates that there is enough firepower outside the market, but also indicates that the industry has not reached the fully FOMO stage of typical bubble characteristics."
For example, Cathy Wood's ARK Investment sold its stake in Nvidia in January of this year, so it did not benefit from the recent surge in large-cap tech stocks caused by AI.
Research data shows that "it is crucial that retail investors have not yet entered the market." This frenzy "seems to have only triggered a small increase in retail bets, at least for now."
"Analysis of trading data shows that, despite the media hype, the AI frenzy is relatively mild compared to the meme stock bubble."
The following figure is an example of meme stocks GME and AMC, compared with Nvidia and AMD.
The only AI concept stock that currently attracts retail funds is C3.ai.
However, Vanda warns that recent trading indicates that retail investors will continue to lose interest in bank and crypto-related stocks.
"If the excellent performance of AI stocks continues, we expect retail investors to become more actively involved in Nvidia, AMD, Amazon, Microsoft, Alphabet-C, Tesla, and others."