Retail Investors "All In" Again? Wall Street Panic Selling While Retail Investors Go on a Buying Frenzy
Source: Jinshe Data
Wall Street continues to sell off software stocks out of concern over the disruptive impact of AI, but non-professional investors are going against the trend and buying in.
According to data compiled by JPMorgan, retail trading activity in the hard-hit software sector is approaching historic highs, even though the S&P Composite 1500 Software & Services Sub-Index has fallen nearly 20% since the beginning of the year.
JPMorgan strategist Arun Jain noted that despite "cracks continuing to appear in certain areas of the market," retail investors are still "providing support to the software sector."
Microsoft (MSFT.O) has been the most favored target for retail investors both last week and year-to-date. Other companies attracting retail interest include ServiceNow (NOW.N) and AppLovin (APP.O).
These retail buying behaviors are often described using the acronym "YOLO" (You Only Live Once), and this time, it is happening as software stocks come under pressure due to the launch of a series of new AI products. Wall Street is concerned that these AI products may replace services offered by companies like Salesforce (CRM.N) and Adobe (ADBE.O).
This Monday, "panic trading" intensified after a little-known institution, Citrini Research, released a report raising the possibility that AI could trigger a broad economic shock. Nassim Taleb, author of "The Black Swan," also warned that the software industry could face a wave of bankruptcies.
Marshall Front, Chief Investment Officer at Front Barnett Associates, commented:
"In our view, the sell-off in software stocks is clearly overdone, and current valuation levels are attractive."
Concerns related to AI also do not seem to have scared off ordinary retail investors, who continue to buy in during every dip. According to data from VandaTrack Research, on Thursday, Nvidia (NVDA.O) closed down 5.5%, its worst day since April 2025, yet attracted a record proportion of retail dip-buying.
Broadcom (AVGO.O), the iShares Expanded Tech-Software Sector ETF, and the iShares Semiconductor ETF also saw significant dip-buying activity. Vanda Research noted that retail investors are on track to record their largest single-day buying strength in months, purchasing $336 million in individual stocks within just 80 minutes of the market opening, with the IGV ETF ultimately rising 2.2%.
Analysts say that in an environment almost entirely driven by AI news, where any slight development can trigger market reactions, retail investors may be rediscovering undervalued opportunities.
Walter Todd, Chief Investment Officer at Greenwood Capital Management, said: "Given the downturn we've already seen and its relatively indiscriminate nature, I don't think now is a bad time to look for value."
Todd added that while the long-term prospects for software companies remain unclear, short-term bets may be easier to make.
"These stocks have been aggressively sold off for several weeks—actually, several months," he said, "so it's easy to expect at least a short-term rebound."
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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