After a sharp selloff in AI stocks triggered by tariff concerns in April, trading activity in the artificial intelligence sector has regained momentum in recent weeks. However, retail investors are now adopting a noticeably different approach, reflecting a more cautious and diversified investment strategy.
According to recent analysis by market research firm Vanda Research, led by analysts Marco Iachini and Lucas Mantle, retail money is flowing away from the well-known “Magnificent 7+” tech giants—such as Nvidia, Apple, and Microsoft—that dominated investor interest in recent years. Instead, investors are increasingly targeting smaller, more volatile secondary AI stocks and related high-risk opportunities. This shift follows a surge in bargain hunting after the “Freedom Day” tariff announcements in April, which caused significant market turbulence.
Nvidia (NVDA), once a favorite among retail traders, has seen substantial outflows since mid-May, even as easing geopolitical tensions between the US and China helped boost its share price. Leveraged ETFs tied to Nvidia, which typically deliver two to three times the daily returns of Nvidia shares, experienced their lowest purchase volumes in a year last month. While options market activity does not indicate bearish sentiment, analysts interpret this as a classic profit-taking phase.
Since the beginning of 2025, most of the “Magnificent 7” stocks experienced declines but have since rebounded sharply from their April lows. Retail investors likely capitalized on these dips to accumulate shares and have been locking in gains as prices recovered.
At the same time, retail investors are pouring funds into smaller-cap companies within the AI ecosystem, particularly data center operators and hardware service providers such as Applied Digital (APLD), Navitas Semiconductor (NVTS), and CoreWeave (CRWV). Over the past month, retail buying in these stocks surged by more than 150%. These firms maintain close business ties with Nvidia and are essential players in the AI supply chain.
Retail appetite for quantum computing stocks also remains strong, underscoring a high tolerance for risk. In the final week of May, retail purchases of D-Wave Quantum (QBTS) shares reached $6 billion in value, eclipsing the trading volume of UnitedHealth Group (UNH), which has a market capitalization of $275 billion. Meanwhile, retail investors also injected $17 million into Meta Platforms (META) and $25 million into Rigetti Computing (RGTI), an emerging quantum computing startup.
Despite recent market rebounds, analysts express caution regarding retail investors’ heightened risk-taking. Iachini and Mantle note that while it is common for investors to seek higher-risk assets following successful bargain buying, the prevailing tariff uncertainties and unclear economic outlook mean that investor optimism may be misplaced. This mismatch raises concerns that the current equity rally could be approaching its final stage.
On Monday, risk appetite was clearly visible as the small-cap Russell 2000 index and tech-heavy Nasdaq led U.S. stock gains. Navitas Semiconductor shares recently surged nearly 25%, and CoreWeave rose about 15%, reflecting ongoing inflows into these growth-focused tech firms.
In summary, retail investors, after weathering earlier tariff-driven volatility, are recalibrating their strategies by moving away from established tech giants toward smaller, high-growth AI and quantum computing stocks. This shift signals confidence in emerging technology trends but also introduces additional uncertainties into the market outlook.
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