U.S. Retail Investors' Dip-Buying Enthusiasm Plummets, JPMorgan: Last Week's Net Buying Far Below Average; NVIDIA Corporation (NVDA.US) Still Saw Nearly $1 Billion in Inflows

On Thursday, JPMorgan pointed out in its latest "Retail Investor Observation" report that as U.S. inflation data came in above expectations and technology stocks continued to adjust, the risk appetite of U.S. retail investors weakened noticeably. In the week from October 8 to 14, retail net buying was only $3.4 billion, far below the average of $6.7 billion per week over the past 12 months. However, although retail buying overall weakened, some artificial intelligence (AI) and semiconductor leaders were still sought after, among which NVIDIA Corporation (NVDA.US) received about $942 million in net buying in a single week. JPMorgan's strategy team led by Arun Jain noted that the previously brief rebound in retail investment enthusiasm did not persist. Against the backdrop of a lack of positive catalysts and sluggish market risk sentiment, retail fund inflows slowed further. The report showed that last week the overall strength of retail fund inflows was only at the 5th percentile of the historical distribution, indicating that buying intensity was at an extremely low level. Among this, ETF inflow strength fell to the 2nd percentile, while single-stock trading was at the 21st percentile. The U.S. September Consumer Price Index (CPI) released on Wednesday further dented market sentiment. JPMorgan noted that headline CPI rose about 0.65% month over month in September and 3.7% year over year, with the month-over-month increase exceeding market expectations by the largest margin since March 2024. Core CPI rose about 0.33% month over month and 2.6% year over year, indicating that inflationary pressure remains stubborn. Affected by this, the Nasdaq 100 fell about 2% on Wednesday, and the S&P 500 also ended its streak of multiple consecutive trading days without a single-day decline of more than 1%. JPMorgan economists expect that the September core Personal Consumption Expenditures (PCE) price index may rise 0.31% month over month and 3.1% year over year. The bank believes that this level of inflation is enough to make a Fed rate hike in October an option worth considering, although its baseline forecast remains that the Fed will raise rates again in December. Retail investors retreat from technology ETFs but still selectively buy semiconductor stocks Technology stocks are the area where recent changes in retail investor behavior have been most evident. The report noted that as the semiconductor sector fell about 9% cumulatively last week, funds that had previously flowed back into technology ETFs reversed rapidly. JPMorgan data showed that the retail fund flow indicator for technology ETFs plunged from the 73rd percentile the previous week to the 4th percentile, indicating that investors shifted from active buying to clear selling. Among these, the Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL.US) and the iShares Semiconductor ETF (SOXX.US) became the main selling targets. At the same time, momentum strategy ETFs also saw outflows, with the iShares MSCI USA Momentum Factor ETF (MTUM.US) being one of the main drags. JPMorgan noted that since October, momentum factor performance has continued to weaken, mainly because long portfolios tilted toward speculative growth stocks and semiconductor stocks underperformed short portfolios dominated by software stocks. However, in contrast to the selloff in technology ETFs, retail investors still maintained relatively strong buying interest in some technology single stocks. Data showed that last week retail net buying of ETFs reached $3.2 billion, while net buying of single stocks was only $200 million, reflecting that investors overall still preferred to allocate assets through ETFs. At the single-stock level, the technology sector was one of the few areas to receive net inflows. In addition to the U.S. "Magnificent Seven," retail investors also concentrated buying in some semiconductor, memory chip, and AI infrastructure-related stocks. Among them, NVIDIA Corporation became the stock most favored by retail investors, with net buying reaching as high as $942 million in a single week. Alphabet Inc. Class C parent Alphabet (GOOGL.US), Tesla, Inc. (TSLA.US), Apple Inc. (AAPL.US), Amazon.com, Inc. (AMZN.US), and Meta (META.US) received about $132 million, $111 million, $74 million, $53 million, and $39 million in net buying, respectively. By contrast, Microsoft Corporation (MSFT.US) saw about $15 million in retail net selling. Among other technology stocks, SanDisk (SNDK.US) received about $238 million in net buying, and Broadcom Inc. (AVGO.US) received about $139 million in net buying. Retail investors' choices within the semiconductor sector were clearly divergent. Micron Technology, Inc. (MU.US) saw about $123 million in net selling, and AMD (AMD.US) saw about $70 million in net selling, indicating that retail investors did not indiscriminately buy the dip across the entire semiconductor sector. JPMorgan noted that retail investors have recently returned to their previous trading pattern, namely selling software stocks while selectively buying semiconductor and hardware stocks after pullbacks. This allocation direction differs somewhat from the broader institutional investor positioning trend. It is worth noting that although the recent technology stock correction has caused losses for retail investors, because investors increased holdings in semiconductor and memory chip stocks as early as May and shifted to hyperscale cloud computing companies after large technology companies reported strong second-quarter results, the related portfolios have still maintained relatively leading performance year to date. Financials, industrials, and consumer sectors sold off, with funds further concentrating in AI leaders In addition to technology stocks, retail investors generally adopted a cautious attitude toward other major sectors. JPMorgan data showed that last week the financials sector saw about $330 million in retail net selling, the industrials sector saw about $302 million in net outflows, the consumer discretionary sector saw about $240 million in net outflows, and the healthcare sector saw about $186 million in net outflows. The utilities sector has also continued to face retail selling since mid-to-late August, while industrial stocks faced further selling pressure after the third-quarter earnings season began. From a thematic investment perspective, retail funds remained mainly concentrated in AI data centers, electrification, technology giants, growth stocks, and AI commercialization-related stocks, indicating that AI remains an important investment theme attracting retail funds. However, the divergence in fund flows means that retail investors' attitude toward AI investment has shifted from broad chasing of gains to more cautious stock selection. JPMorgan bullish on semiconductor earnings performance; Broadcom Inc. and Marvell remain top picks As the third-quarter 2026 earnings season unfolds, JPMorgan believes the semiconductor industry will become a market focus. The bank expects 62 S&P 500 constituent companies to report results over the next seven days, with a combined market capitalization accounting for about 14% of the index's total market value, mainly concentrated in the financials and industrials sectors. For the semiconductor industry, JPMorgan maintained a cautiously optimistic view, expecting most covered companies to still deliver solid results and provide positive forward guidance, continuing the trend of both results and guidance exceeding expectations over the past several quarters. However, the bank emphasized that the market's focus for the semiconductor industry is shifting from the strength of demand to supply constraints, including when capacity bottlenecks in areas such as advanced-process wafer foundry and memory chips can be alleviated, and when newly added capacity can effectively meet demand. In terms of stock selection, JPMorgan continued to list Broadcom Inc. (AVGO.US) and Marvell Technology, Inc. (MRVL.US) as top picks in the semiconductor industry, while also watching companies such as NVIDIA Corporation, AMD, Micron Technology, Inc., and SanDisk. The bank believes that companies with AI business exposure, benefiting from tight supply, possessing strong pricing power, or able to benefit from an industry cyclical recovery are more likely to see earnings estimate upgrades. In addition, JPMorgan specifically mentioned the latest performance of lithography giant ASML Holding NV ADR (ASML.US). ASML Holding NV ADR's third-quarter gross margin reached 57.5%, above previous guidance, and its fourth-quarter sales, gross margin, and EBIT guidance also all exceeded market expectations. JPMorgan noted that the growth rate implied by the midpoint of ASML Holding NV ADR's 2026 growth guidance is about 36%, higher than the bank's estimate of about 31% growth for the global wafer fabrication equipment market, indicating that the company is expected to continue outperforming the overall industry. More notably, orders recently obtained by ASML Holding NV ADR have exceeded the level that its existing 2027 to 2028 capacity can fully satisfy, so the company is considering increasing its 2028 capacity expansion to more than about 30% above its previous plan.