Investors rush into A.I. stocks — Most of their top buys have already doubled this year

Published Thu, Feb 9 202311:16 AM EST

Retail investors are pilling into artificial intelligence stocks, the latest craze to hit Wall Street, according to Vanda Research. Overall, aggregate inflows from retail investors over the past five trading days (ending Wednesday) have reached levels not seen since 2020-2021, the firm said. Yet the purchases are heavily concentrated in a few names, including AI plays like Nvidia and C3.ai , Vanda senior vice president Marco Iachini wrote in a note Thursday. "We believe FOMO and momentum remain the main drivers of flows, meaning that retail investors remain susceptible to negative catalysts. That said, should macro conditions remain favorable in the near term, we do not exclude a continuation of speculative activity in AI-related stocks or other niches of the market," he said. AI has been gaining momentum since OpenAI's ChatGPT was launched last year. Microsoft , which invested billions into the company , uses the software to power updates to its Bing search engine and Edge browser. Microsoft CEO Satya Nadella told CNBC Tuesday AI is the biggest thing to happen to the company in the nine years he's been at the helm. "I've never ever felt this liberated in terms of opportunity in the days ahead," Nadella said. Microsoft is up about 13% so far this year. Meanwhile, Alphabet revealed its own AI chatbot , Bard, on Wednesday. Investors appeared unimpressed, sending shares 7% lower for the day. The stock was down nearly 4% on Thursday, but is up 9% year to date. Here are the top A.I. names retail investors put their money into this past week, according to Vanda Research. C3.ai was among the favorites of retail investors, with $83.65 million in inflows over the past five trading days, Vanda's data show. The enterprise AI software stock is up 132% so far this year. CEO Tom Sieble told CNBC's " Closing Bell " on Monday that C3.ai's generative AI will "fundamentally change the human computer interaction model" as it relates to enterprise applications. However, the stock may be past the near-term peak, Iachini said. "Indeed, the pace of buying has begun slowing, which typically foreshadows a loss of price momentum," he said. However, interest in AI remains high as retail investors rotate into other AI-related small-cap stocks, he noted. One of those is BigBear.ai Holdings , which has a $656 million market cap. The company operates AI and machine learning through its daily analytics platform. Its stock is up a whopping 681% year to date. Another is SoundHound AI , which has a market cap of $892 million and is up 151% so far this year. Microsoft and Nvidia, already seeing a growing interest from retail investors, may also see investments pick up, according to Vanda. If shares of Tesla , which is another general retail investor favorite, continue to move higher, traders may lock in profits or avoid adding further exposure, Iachini said. "We expect demand to turn to NVDA and MSFT as alternative investment options," he said.