Exclusive: Retail investors sour on Big Tech — except 2 stocks
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Outside of Nvidia and Palantir, retail investors soured on Big Tech last month, according to Charles Schwab's trading activity index, STAX, which measures customer investing behavior.
Why it matters: Retail added risk over the month in other areas, indicating that the tech sentiment was driven by idiosyncratic valuation concerns.
What they're saying: Retail investors "still believe that tech as a whole is overvalued," Joe Mazzola, Charles Schwab's head trading and derivatives strategist, tells Axios.
- Tech was the largest net sell in terms of dollar outflows, but Nvidia and Palantir were the exceptions.
- Both stocks have stretched valuations, with Nvidia trading at nearly 50 times earnings and Palantir at around 500 times earnings. (Gulp.)
- But both stocks were the top buys for retail over the last month.
By the numbers: Nvidia is the clear retail winner, with net buying for the chip giant outpacing that of Palantir by 50%, Mazzola says.
- This comes after Nvidia had moved out of client favor in recent months.
State of play: What did Nvidia and Palantir have in common last month? They both had pullbacks after earnings.
- Palantir is down 16% in the last month and Nvidia is down 7% over the same period, as institutional investors grow concerned about valuations and policy vulnerability for these companies.
- Both stocks are in the red over the last month despite retail's appetite for dips on these stocks.
Zoom out: The STAX index, which measures exposure to risk as well as trading behavior, hit a five-month high.
- Market volatility overall, meanwhile, has dropped to near-record lows.
- This indicates that retail investors are adding risk as market unpredictability has faded.
- Activity is not at FOMO levels just yet, but that kind of activity is starting to pick up, Mazzola says.
Zoom in: Clients are adding risk in new ways, ramping up exposure to bitcoin miners and, in some cases, to leveraged ETFs, which contain greater dangers for potentially higher reward.
What we're watching: Will retail keep adding risk as Wall Street sells into the seasonally weak period ahead?
- And will any dips for the biggest tech names remain buyable?
