Individual Investors Shifting Focus to Electric Vehicles

According to a report from Wall Street research firm Vanda Research, individual investors are anticipating a stock-market rally in 2023. However, there are signs that they are pivoting their attention towards electric-vehicle (EV) makers and moving away from artificial-intelligence (AI) plays.

In addition to purchasing individual stocks, investors are also showing interest in equity exchange-traded funds, indicating their bullish sentiment towards both the overall market and specific investment themes.

Vanda Research analysts noted, “We also start to see some signs of rotation from AI stocks to EV.”

While U.S. stocks experienced a significant decline on Thursday, after a strong performance in the first half of the year driven by megacap technology stocks and increased interest in AI-related companies, investors remain optimistic. The Dow Jones Industrial Average (DJIA) was down approximately 430 points, or 1.3%, while the S&P 500 (SPX) and Nasdaq Composite (COMP) were both down around 1% at mid-session.

According to Vanda, monthly net inflows into U.S. equities now average $1.4 billion per day, which is close to the record set in March last year at $1.5 billion. The research firm suggests that while further acceleration in cash equity purchases may be limited, there is still potential for speculative buying through the options market.

In conclusion, individual investors are shifting their focus towards the EV sector and moving away from AI stocks, while still maintaining a positive outlook on the stock market overall.

Signs of Rotation in the EV Market

Recent reports suggest that there are signs of rotation in the electric vehicle (EV) market, indicating a shift in investor sentiment. Analysts have observed an increase in rotation, often fueled by short-term trends that create excitement among investors. The catalyst for this shift could be Tesla Inc.’s impressive second-quarter delivery numbers, which were reported earlier this week.

Tesla, already a popular choice among investors, has seen substantial inflows and remains one of the most-bought stocks. However, other less prominent names in the EV sector, like Rivian Automotive Inc., have also started to rebound. This resurgence can be partly attributed to a rotation away from hot artificial intelligence (AI) stocks that have experienced a prolonged rally. Investors seem to find these AI stocks less compelling now that they have been performing well for several weeks.

In the case of Rivian, retail net buying rose to an impressive $30 million on Wednesday. This surge was driven by a 23% increase in the stock’s value on Monday, following better-than-expected quarterly deliveries. This positive momentum suggests that there will likely be increased retail demand for EV stocks in the future.

Currently, there are several laggard EV stocks that could potentially benefit from this shift in investor focus. These include Nio Inc., Li Auto Inc., Lucid Group Inc., XPeng Inc., Plug Power Inc., and Nikola Corp.

Overall, the EV market is experiencing signs of rotation, driven by Tesla’s strong performance and a perceived decline in the attractiveness of AI stocks. This presents exciting opportunities for both established players and emerging contenders in the EV industry.