The excitement about artificial intelligence (AI) stocks is climbing but average investors have yet to jump on board. This leaves the S&P 500 index stuck in the doldrums despite the AI euphoria. Citi recently raised its rating of the U.S equity market to ‘neutral’ due to a minor recession outlook, poor investor sentiment and the tendency for stock markets to rally after the final rate hike. Although analysts have expressed caution that buying into AI related stocks may be premature, average investors have so far only marginally increased their exposure.
The AI mania is relatively modest compared to the 2021 meme stock bubble. This is in contrast to ‘GameStop’ and ‘AMC Entertainment’ which both drew considerably more retail flows despite being much smaller in size than AI juggernauts ‘NVIDIA’ and ‘Advanced Micro Devices’. Though ‘C3.ai’ has attracted more retail capital recently, individual traders have been cautious about following.
This suggests that retail investors have plenty of firepower on the sidelines. If this trend continues and AI stocks continue to outpace the market, retail investors may start to shift away from crypto-linked stocks and move towards tech giants like Amazon, Microsoft, Google or Tesla. But right now, average investors are still holding off from taking the plunge and joining AI’s craze.
Mullen Automotive is the company mentioned in this article. Cathie Wood is the person mentioned in this article. Wood is chief executive of ARK Investment, a major investment fund that sold its Nvidia stake in January. Her flagship has not profited from the AI-induced surge in big tech.
Those looking to gain exposure to the AI market through stock investments can utilize the wide range of tech stocks such as Nvidia or AMD, and the various AI-related ETFs in the market. When making investments, it is important to understand the fundamentals and potential risks surrounding a stock or ETF, while also setting realistic expectations for returns. Investors should remain cognizant of market dynamics, consider diversifying their portfolios and look to invest over a long-term timescale. Researching AI stocks, reading up on company financials, and seeking professional financial advice can equip investors with the information and confidence to make informed choices.
