Nvidia rally: Retail investors stay out on growing slowdown worries

FILE PHOTO: A smartphone with a displayed NVIDIA logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) - The rally in the shares of Nvidia Corp that briefly propelled its market value to the trillion-dollar club saw little participation by retail traders, data showed, the latest sign they were turning cautious due to growing recession fears.

Even though the chip designer is one of the top picks for individual traders, Vanda Research analyst Lucas Mantle said it was mainly institutional investors betting on artificial intelligence that led to the biggest three-day percentage gain in more than two decades.

Retail buying in Nvidia shares on an average nearly halved to $27.9 million in May compared to February, Vanda Research data showed, even as it remained the fourth most-traded stock by individual investors.

"There are sound opportunities in money market funds where they get returns for nothing as opposed to a market where it is risky right now," Mantle said on Wednesday.

After a record net buying in U.S. stocks the first quarter, retail investors have largely remained on the sidelines amid stresses in the banking sector and signs of an economic slowdown.

Following a spectacular forecast last week, Nvidia broke Tesla Inc's record of being the most traded U.S. stock by retail traders in every session for more than six months straight, according to J.P. Morgan data.

The total value of the stock traded by retail investors surged to $2.5 billion last Thursday, but still net purchases remained marginal at $43 million, Vanda Research said.

J.P.Morgan data showed Nvidia was the third most traded stock by retail investors but the buy and sell orders were nearly even, indicating lower retail interest than in the first quarter.

"It's becoming evident that more concrete signs of a Fed pause, further progress on inflation and resiliency in the macro environment are likely key missing elements for retail participation to build back up," Vanda analysts wrote in a note.

(Reporting by Medha Singh in Bengaluru, Additional reporting by Vansh Agarwal and Lance Tupper; Editing by Arun Koyyur)

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