Retail traders, often referred to as the "YOLO crowd," are increasingly selling off their holdings in high-flying computer memory, storage, and AI-linked big tech stocks. This trend is driven by a desire to accumulate "dry powder" for the upcoming initial public offering (IPO) of SpaceX. Analysts from Vanda Research Ltd. observe that non-professional traders have been net sellers of individual stocks for three consecutive days, a pattern not seen since March 2020. This selling is particularly concentrated in chipmakers like Micron Technology Inc., Super Micro Computer Inc., Qualcomm Inc., and Advanced Micro Devices Inc., all of which experienced significant drops in a recent tech selloff.
SpaceX's IPO has generated immense euphoria, with the company reserving at least 20% of its offering for individual investors and attracting over $70 billion in retail orders. Fidelity has even lowered the threshold for its customers to participate to just $2,000. This unprecedented access for individual investors is prompting retail traders to liquidate current holdings, even profitable ones, to finance their participation. Viraj Patel, global macro strategist at Vanda, suggests that retail investors are not questioning whether to buy into SpaceX, but rather how—either by adding new positions or by aggressively selling recent winners.
This shift in retail investor sentiment is causing volatility in the market. Douglas Beath, global equity strategist at Wells Fargo Investment Institute, warns that selling existing tech and non-tech stocks could lead to "issues and volatility down the line through the rest of the year." The high proportion of household wealth in stocks, currently at an all-time high of nearly 35% of total financial assets, suggests that amateur investors will likely sell existing holdings to fund these new investments. While Beath doesn't expect a sustained market downturn, he acknowledges the potential for "some indigestion" due to the significant influence of these fast-moving retail traders. This trend might also extend to other upcoming mega IPOs, such as those from Anthropic and OpenAI.
