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Retail Investors Eye AI Stocks Despite Sector Rotation
9 Dec
Summary
- Stacks Index reached an eight-month high in November.
- Investors bought AI stocks like Nvidia during pullbacks.
- Clients trimmed winning stocks such as Apple and Eli Lilly.
The Stacks Index, a gauge of retail investor sentiment, surged to an eight-month high in November. Despite this bullish trend, the overall market saw sector rotation, with investors moving out of cyclical names. Instead, there was a notable focus on the "Mag 7" stocks, particularly those heavily involved in artificial intelligence.
Clients capitalized on pullbacks in major AI companies, including Nvidia, Palantir, and Meta, which experienced significant dips of around 20%. These dips were viewed as tactical opportunities to enter or increase positions in these tech giants, especially after strong earnings reports. This strategy suggests a renewed, albeit tactical, belief in the AI theme.
Conversely, investors used rallies in stocks like Apple, Broadcom, and Eli Lilly as opportunities to trim positions. For instance, Eli Lilly saw substantial gains, but its high Relative Strength Index (RSI) prompted some clients to sell. This behavior demonstrates a prudent approach of taking profits in winners rather than chasing them, balancing AI stock buys with trimming overextended positions.
