According to research analysts at Vanda Research, retail investors are showing less enthusiasm for artificial intelligence (AI) stocks. The analysts shared a chart that demonstrates a decline in net purchases of AI-themed stocks by retail investors.
Vanda Research also noted a decrease in news coverage of the AI sector. The excitement surrounding AI-related stocks and technology peaked earlier this year, particularly with Nvidia’s bullish predictions on the demand for its AI-related chips. While Nvidia’s stock is still up 211% this year, the enthusiasm for many tech stocks faded in August due to concerns about China and interest rate hikes, as well as the realization that AI benefits might not materialize immediately.
However, Vanda analysts believe that Nvidia will not be significantly affected by the waning interest in AI stocks. The decline in short interest in Nvidia aligns with its rising stock price, indicating that bearish institutional investors may have covered their short positions, making them unlikely to sell the stock in the near term.
Smaller AI-related companies, like C3.ai, have not experienced the same resilience. C3.ai’s shares are up 154% this year but have declined 9% this month due to a larger-than-expected projected full-year loss. Analysts remain hopeful, with most of them holding a “hold” or similar rating for the company.
Another exception to the AI buying slowdown is IonQ, a small quantum computing company that has been outperforming its AI-related counterparts. Demand for IonQ’s stock has remained strong, despite a potential weakening of retail interest, and short interest in the company continues to increase.
Observing the slowing interest in AI, Young Money blogger Jack Raines pointed out that ChatGPT’s traffic saw declines of 3.2% in August after 10% declines in June and July, according to data from analytics firm Similarweb. Raines believes that while ChatGPT may experience a resurgence when students return to school, the initial hype around AI disrupting everything may have cooled down.
Deutsche Bank strategists also commented on the declining interest in AI, noting that the summer break and media attention on other topics contributed to the waning hype. However, they highlighted important developments in the AI industry, such as the maturing of underlying technologies and a shift in attitudes towards AI.
Overall, while retail investor demand for AI stocks may be slowing down, the long-term impact on stock prices is dependent on the participation of institutional investors.
