Retail investors are piling into AI stocks, while institutional money is turning defensive
TIMOTHY A. CLARY / AFP via Getty Images
- Sentiment toward the AI trade has diverged among big money and retail investors.
- Retail traders piling back into the top AI plays, Citadel Securities says.
- Meanwhile, institutional investors are turning increasingly defensive.
Everyday investors have been piling into AI bets at a moment when institutional money is playing defense.
Retail is showing renewed willingness to pour money into high-flying tech stocks, adding exposure to chips, neoclouds, and other infrastructure plays in the last week.
"Retail buying is picking up again, even as overall trading activity remains below average," wrote Scott Rubner of Citadel Securities. "Last week, retail net bought $9.1 billion of US equities on our platform, the largest weekly net buying in 15 weeks (since late June) and the ninth-largest week over the past year."
The buying was concentrated heavily in AI play. Semiconductors saw $2.6 billion of net inflows, and October is set to be the largest month of net retail buying on Citadel Securities' platform. The $700 million poured into neocloud stocks is the largest weekly buying spree the firm has observed among retail.
Rubner said the cohort's weekly net buying has risen steadily over the past three weeks, jumping from $4.8 billion to $6.4 billion to last week's $9.1 billion figure.
In a previous note, Rubner said that October would be an opportune month for investors to reload their portfolios with stocks after September volatility reset valuations. His latest analysis shows that individual traders are doing exactly that, following a classic playbook of buying the dip.
Meanwhile, a combination of hotter-than-expected inflation, growing speculation about a credit event in AI-linked debt, and a volatile bond market has sparked fresh volatility lately, spurring a sharp defensive turn among institutional traders. Viraj Patel, global market strategist of Vanda Research, flagged a "buyer's strike" taking place on Wall Street.
"The institutional equity bid is starting to fade. Aggregate US equity positioning has gone nowhere since the summer, with HF exposure rolling over and institutional options buying losing momentum," Patel said. "More tellingly, investors are rotating away from growth & quality towards defensives. The institutional dip-buying appetite is clearly fading."
The divergence in sentiment was on display this week with CoreWeave, the neocloud firm that saw its stock plunge on fears about its debt position.
"Retail bought a record amount of CoreWeave yesterday despite the sharp sell-off," Patel said on Thursday. "But institutional options flows have been deteriorating across the major AI baskets. This on its own tells you a lot about where conviction sits on the street right now. Institutional investors are very much in wait-and-see mode now."
Patel also noted, though, that while retail traders are back to betting on AI, they also appear to be less aggressive than in previous moments of market stress, which may be cause for concern.
"Unlike previous years, we haven't seen the same consistent FOMO dip-buying throughout 2026," he added. "Retail appetite is still there, but is it enough to offset the fading institutional bid."
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