Retail traders' infatuation with high-flying computer memory and storage companies is fading now that the next big thing — SpaceX's initial public offering — is on the way.
The do-it-yourself crowd has been paring its exposure in semiconductor stocks and refraining from buying dips elsewhere, according to data compiled by Vanda Research Ltd. While the sellers may be merely ditching AI-linked stocks after big gains, some analysts see it as a sign the group is gathering dry powder for SpaceX's public debut.
Retail Traders Dump Big Tech to Raise 'Dry Powder' for SpaceX
Few companies have generated as much euphoria ahead of their IPOs as SpaceX, and retail traders, many of whom are die-hard fans of Elon Musk, want a piece of it. Whether ditching AI winners for a rocket company that has yet to turn a profit turns out to be a winning bet remains to be seen. Regardless, most analysts agree that the setup is a recipe for more price swings ahead.
“Selling existing stocks, tech and non-tech, could lead to issues and volatility down the line through the rest of the year,” Douglas Beath, global equity strategist at Wells Fargo Investment Institute, said by phone. The offering plus two other upcoming mega IPOs, as well as huge stock sales from existing tech companies, are likely to fan volatility at a time when household stock exposure is sitting near a record, he added.
Non-professional traders have sold individual stocks for three consecutive days through Wednesday, in the first such occurrence since March 2020, according to data compiled by Vanda, which tracks retail investor flows. Selling has been concentrated in chipmakers and recent AI winners, the data show.
“Evidence so far is that retail may be saving some dry power for these upcoming IPOs,” said Viraj Patel, global macro strategist at Vanda. “At this point in the calendar year, we would normally expect slightly stronger activity than what we’re currently seeing — and so something seems to be holding retail back.”
Retail Selling Intensifies Ahead of SpaceX IPO
On Monday, retail traders pulled the most cash from individual stocks since November 2023, Vanda’s data show. The next day, when technology names led a rout in the S&P 500 index, retail investors were again sitting on the sidelines.
A recent drop in retail favourite Micron Technology Inc. may be evidence of individual investors “selling flows in recent winners and levered products” to invest in SpaceX, Greg Boutle, United States head of equity derivative strategy at BNP Paribas, said on Friday.
To be sure, other factors could be at play, including a sense of fatigue over the AI hype in the market and worries that it will not deliver the promised seismic changes to the economy.
Space-related stocks is one group that has bucked the risk-off trend, with data from Vanda showing the highest appetite among retail traders since 2024.
