In 2023, the world has witnessed a significant shift in the dynamics of the stock market, particularly with retail investors gravitating towards the AI giant NVIDIAThis trend is not just a fleeting moment but represents a broader movement of individual investors who have increasingly placed their faith in technology stocks, primarily driven by advancements in artificial intelligence.

Recent data reveals that retail investors have poured approximately $29.8 billion into NVIDIA's stocks this year—a staggering increase of 885% compared to three years priorThis figure positions NVIDIA as the most purchased stock among retail investors for the yearSince the beginning of the year, NVIDIA's stock price has soared over 180%, bringing its market capitalization to around $3.43 trillion, solidifying its status as one of the largest companies in the world.

Marco Iachini, a senior vice president from Vanda Research, remarked on the dramatic rise in NVIDIA's stock, stating, “The surge is incredible, and it has overshadowed Tesla." Analysts from Bank of America predict that NVIDIA will maintain its momentum, especially with the hype surrounding investments in artificial intelligence and the deployment of its Blackwell chips among clients in the cloud services sector

The AI semiconductor industry is expected to flourish as businesses seek to leverage AI capabilities.

The enthusiasm extends beyond the shores of the United States—on December 26, stocks associated with NVIDIA witnessed a significant boost within the Chinese stock marketCompanies like Yingweike, Jingwang Electronics, and Yiyuan Communication experienced impressive gains, showcasing the global influence NVIDIA holdsThe remarkable upturn is encouraging the retail investor community to dive deep into these stocks, generating a wave of optimism in emerging markets too.

The Retail Rush Towards NVIDIA

On December 25, Vanda Research released findings indicating that retail investment in NVIDIA stocks had reached $29.8 billion as of December 17, rendering it the top pick among retail investors for 2024. Compared to three years earlier, this influx of capital showcases the evolving trust and dependency on tech stocks among individual investors.

The proportion of NVIDIA shares held by retail investors has more than doubled, going from 5.5% at the start of the year to over 10%. Currently, NVIDIA stands as the second most significant holding among retail investors, right after Tesla

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Throughout 2023, both small and large investors have recognized NVIDIA's potential, culminating in the company's recent addition to the Dow Jones Industrial Average—where it has emerged as one of the index's top performers.

Despite some volatility in trading during December, analysts speculate that NVIDIA could see increases of over 180% by the end of 2024. The company, valued at over $3 trillion, ranks as the second-largest in market capitalization in the U.S., only trailing Apple.

With significant retail investment comes increased volatilityBrian Colello, a stock strategist at Morningstar, points out that as a mega-cap company, NVIDIA exhibits pronounced fluctuations, alluding to the impact retail investors can have on the stock pricesHe expressed surprise at how dramatically stock values can shift, even for a company of NVIDIA's stature.

NVIDIA's appeal is evidently not confined to trading figures; it transcends into the zeitgeist

In August, a group of investors hosted an NVIDIA earnings report viewing party in New York City, which attracted widespread attention from retail investorsThis event followed NVIDIA's 10-for-1 stock split—a strategy typically designed to make shares more accessible and appealing to smaller investors.

Furthermore, NVIDIA recently participated in a Series C funding round for xAI, Elon Musk's artificial intelligence endeavor, contributing to the ongoing infusion of capital into AI technologiesReports indicate that the round raised a substantial $6 billion, with participation from several tech and financial powerhouses, including A16Z and BlackRockMusk has publicly welcomed NVIDIA's investment, regarding it as an honor for his venture.

In addition to NVIDIA, another firm capturing the attention of retail investors is Palantir Technologies

According to Vanda's research, Palantir has witnessed an impressive inflow of funds this year, securing its position as the ninth most purchased security, surpassing giants like Amazon and AlphabetPalantir's stock has skyrocketed nearly 380% in 2024, making it the best-performing stock within the S&P 500. CEO Alex Karp expressed gratitude towards investors in a recent video, especially those willing to go beyond traditional investment approaches.

Optimism for Future Performance

Morgan Stanley recently reaffirmed its commitment to NVIDIA, viewing it as the firm’s “top pick” for next yearThey have high hopes for the new Blackwell chip series, anticipating it will be a significant growth driver for the company in 2025.

Analysts at Morgan Stanley reiterated their "overweight" rating on NVIDIA, driven by positive expectations surrounding the next generation of AI chips

They have set a price target of $166 per share, whereas NVIDIA's current price hovers around $140.

Similarly, Bank of America is expressing optimism about NVIDIA's stock in 2025. Their analysis notes that following the recent sell-off of semiconductor stocks at the beginning of earnings season, these stocks have regained interest from global investors, suggesting they might lead into a new era of exponential growth, reaffirming their crucial role in the market.

The "AI chip power trio" of NVIDIA, Broadcom, and Marvell Technology is featured on Bank of America's list of preferred chip stocks for 2025. This list also includes leading semiconductor equipment company Lam Research, automotive chip leader ON Semiconductor, and a premier name in EDA software, Synopsys.

The analysts anticipate that NVIDIA, Broadcom, and Marvell will continue to benefit from the surging market demand that closely aligns with AI data center needs, the growing interests of cloud computing clients, and the ongoing expansion of computing power requirements across global data centers.

Additionally, ON Semiconductor, which has historically lagged behind the broader market and semiconductor indices, is poised to capitalize significantly on evolving demands from the electric vehicle sector, likely boosting revenues in the latter half of next year