Retail Traders Loaded Up on AI Spending Winners Before Selloff

by Natalia Kniazhevich of Bloomberg News, 10/23/26

Retail investors who spent the past week loading up on semiconductor stocks at the center of the artificial intelligence trade are getting pummeled amid Thursday’s rout.

Over the past week, individual investors increased their purchases of chipmakers as well as companies that provide neocloud services and manufacture memory devices, while buying of the so-called Magnificent Seven technology stocks weakened, according to JPMorgan Chase & Co. strategist Arun Jain, who cited trading flows from last Thursday through Wednesday. Single-stock technology buying reached its highest level since the start of the momentum unwind in July, he wrote in a note to clients on Wednesday.

The mom-and-pop crowd was feeling the heat on Thursday as chipmakers led the S&P 500 Index lower amid escalating concerns about the Mideast conflict coupled with fears about extravagant spending on AI infrastructure. A gauge of semiconductor stocks tumbled 6.7% in its worst day since June.

See more: The Hidden Costs of AI: Are You Paying Attention?

The stocks most bought by retail traders were SanDisk Corp., Taiwan Semiconductor Manufacturing Co. and Nebius Group NV, which has gained prominence in retail investing forums on social media. Shares of the firms dropped at least 4% on Thursday. SpaceX shares were fourth on that list through Tuesday, but investors sold them on Wednesday after they jumped 7.8% on the company’s encouraging earnings report.

Retail demand was even stronger for technology exchange-traded funds. Weekly inflows reached their second-highest level on record, driven in part by dip-buying late last week. Friday marked the largest single-day inflow into tech ETFs on record, lifting weekly purchases to the equivalent of 2.1 standard deviations above the historical average. The VanEck Semiconductor ETF was among the funds that attracted heavy interest.

Retail traders had been favoring Magnificent Seven stocks since July, when the hyperscalers reported strong earnings. Their shift to stocks outside the group suggests that they aren’t abandoning the AI trade as volatility increases, but they are broadening their exposure.

“Investors have rotated from Mag Seven to tech more broadly as the AI ecosystem has produced more durable earnings than initially perceived,” said Joe Gilbert, portfolio manager at Integrity Asset Management.

Technology has been a major driver of corporate profit growth this year, helping sustain investor interest even as fears of an AI bubble mount. Companies in the S&P 500 Information Technology Index are expected to post 66% earnings growth for the third quarter, trailing only the energy and communication services sectors, according to data compiled by Bank of America Corp.

“It is possible to get robust earnings growth with cheaper multiples especially with higher rates outside of the Mag 7,” Gilbert added.

The rotation comes as the technology selloff gathers steam amid renewed fears of higher inflation due a spike in energy prices from the ongoing war in Iran. The Bloomberg Magnificent Seven Index sank as much as 3.8% on Thursday after Meta Platforms Inc. increased its capital spending plans for the year, while the tech-heavy Nasdaq 100 Index slid as much as 3.2%.

The enthusiasm for tech stocks isn’t translating into a broad-based surge in buying, however, as overall retail flows remained subdued for the week, JPMorgan’s data show.

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Bloomberg News provided this article. For more articles like this please visit bloomberg.com.

Retail Traders Loaded Up on AI Spending Winners Before Selloff

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