Retail Investors Are Dialing Back Buying Ahead of Earnings Season

Retail traders haven’t been upping their investments ahead of the coming earnings season the way they have in past quarters.

According to Vanda Research, which tracks investment flows from retail buyers and sellers, individual-investor inflows are more muted with another round of earnings reports around the corner. 

“Although investors typically become more active before earnings reports, trying their luck with their favorite stocks, we are not seeing signs of this trend,” Vanda said in a report Wednesday. Concerns about an economic slowdown “are deterring individual investors from adding exposure to more traditional industries,” the report said.

Retail Enthusiasm for Nvidia, Big Banks Wanes

The firm pointed to Nvidia (NVDA), whose shares are up more than 150% year-to-date but have leveled off over the last month. The chipmaker briefly passed Microsoft (MSFT) and Apple (AAPL) in market capitalization to become the world’s most valuable company, “suggesting the stock might be in a bubble zone,” Vanda wrote.

“The peak of retail bullishness for NVDA seems to be behind us,” the firm said.

The financial sector, whose leading companies will begin releasing earnings reports starting next week, has also lately drawn lower inflows. That’s indicative of investors being less interested in “traditional industries,” Vanda wrote, in favor of emerging sectors like artificial intelligence (AI). 

Investors Still Willing To Buy the Dip

Nike (NKE) saw retail investors scooping up stock after the athletic apparel company’s share price tumbled 20% last Friday on disappointing fourth-quarter sales and guidance for fiscal 2025.

Traders betting on a rebound “highlights the potential re-emergence of the retail investors’ contrarian behaviour that has lacked in recent months,” Vanda said. “Looking at the cohort’s propensity to dip-buy, we find that there has been a pickup as of late.”

An Eye on Tesla’s Rising Stock

Retail investors have been “heavily overweight” in Tesla (TSLA) shares, but traders could finally engage in some profit-taking with the share price up nearly 50% over the past three months. 

Tesla’s shares fell to as low as $138.80 in April but climbed back to $246.39 at Wednesday’s close, leaving the stock nearly flat for the year so far.

“If the stock continues to gain positive momentum, we expect retail investors to rotate back into TSLA and support the stock” until at least the $250 level, Vanda wrote.