Retail investors curb purchases ahead of earnings season

Retail investors have not been increasing their holdings ahead of the upcoming earnings season as they have in previous quarters.

According to Vanda Research, a firm that tracks investment flows from retail buyers and sellers, inflows from individual investors are more limited as another round of earnings reports approaches.

“While investors typically become more active ahead of earnings reports, trying their luck with favorite stocks, we are not seeing any signs of that trend,” Vanda said in a report Wednesday. Fears of an economic slowdown “are discouraging individual investors from increasing their exposure to more traditional industries,” the report said.

Retail Enthusiasm for Nvidia and Big Banks Fades

The company pointed to Nvidia (NVDA), whose shares have surged more than 150% since the beginning of the year but have stabilized over the past month. The chipmaker briefly surpassed Microsoft (MSFT) and Apple (AAPL) in market capitalization to become the world’s most valuable company, “suggesting the stock may be in bubble territory,” Vanda wrote.

“The peak of retail optimism regarding NVDA appears to be behind us,” the company said.

The financial sector, whose leading firms will begin reporting earnings next week, has also seen lower inflows recently. That suggests investors are less interested in “traditional industries,” Vanda wrote, in favor of emerging sectors like artificial intelligence (AI).

Investors still want to buy at the bottom

Nike (NKE) saw retail investor interest in the stock surge after the sportswear company’s shares fell 20% last Friday on disappointing fourth-quarter sales and fiscal 2025 guidance.

Traders betting on a rebound “highlight the potential reemergence of the contrarian retail investor behavior that has been lacking in recent months,” Vanda said. “Looking at the cohort’s propensity to buy on the downside, we find that there has been a recent uptick.”

A look at Tesla’s rising stock

Retail investors were “significantly overweight” Tesla (TSLA) stock, but investors may have finally gotten involved in some profit-taking given that the stock is up nearly 50% in the past three months.

Tesla shares fell to $138.80 in April but rose to $246.39 by Wednesday’s close, meaning the stock remains nearly unchanged this year.

“If the stock continues to rally, we expect retail investors to return to TSLA and support the stock” at least until the $250 level, Vanda wrote.