Retail Investors Have Returned to Betting on AI Amid a Downturn in the Chip Industry — Citadel

Retail investors, who have been cautious of late, are once again betting on their favorite theme—artificial intelligence, according to Bloomberg. Last week, they bought $9.1 billion more in U.S. stocks than they sold on the Citadel Securities market-making platform. The bulk of the funds went toward AI-related stocks and exchange-traded funds, although overall trading activity remained below average. There had not been such a volume of net purchases in 15 weeks, the agency reports, citing a note from Scott Rubner, an equity and derivatives strategist at Citadel Securities.

Purchases of semiconductor stocks totaled $2.6 billion more than sales—making it Citadel’s third-best week of the year. Money flowed into the sector despite doubts about the sustainability of the AI boom, which are weighing on chipmakers’ stock prices, Bloomberg notes.

If this pace continues, October will be a record month for Citadel in terms of net purchases of chipmaker stocks. Retail investors have also invested about $2.4 billion in shares of AI infrastructure companies.

The growth in retail demand is generally attributable to “greater confidence in the direction of spending, rather than increased volumes,” Rubner wrote. According to his data, purchases last week exceeded sales by 2.7%—one of the strongest surpluses in the past year. At the same time, total retail sales were not elevated.

The return of retail investors to the market was preceded by a record-breaking summer and a sharp decline in trading activity in September. In the first half of the year, on days when the S&P 500 fell, investors on the Citadel Securities platform bought nearly 3.5 times the average daily volume—something that had not happened since data collection began in 2020. In September, however, retail stock trading volume fell to its lowest level since 2026 and was 26% below the June peak, Rubner noted on October 1 in his fourth-quarter forecast.

He considered the September decline to be healthy, as it cleared the market of overheated positions. In his quarterly forecast on October 1, the strategist predicted that retail investors would return to the stock market and identified October as a better entry point, as earnings reports and corporate buybacks were returning to the market. The forecast proved accurate, Bloomberg notes.

By early October, when retail investors resumed buying, chipmakers’ stocks had fallen significantly in price. According to Citadel Securities’ calculations as of September 29, the semiconductor sector’s forward P/E ratio had fallen to 17.1—31% below its 2026 high and lower than that of the S&P 500. But the decline continued: the iShares Semiconductor ETF closed lower for the sixth consecutive session on October 13. This streak began on October 6 and carried over into last week, when retail investors were already buying chipmakers’ stocks.

On October 13, pressure on the sector intensified. New triggers for selling included an announcement by Chinese memory chip manufacturer CXMT regarding a technological breakthrough and remarks by Broadcom CEO Hock Tan, who compared the strategies of some investors in the AI boom to gambling at a casino. “Sell first, ask questions later—that’s the mood right now,” said Wei-Sern Ling, managing director at Union Bancaire Privee (as quoted by Bloomberg).

Rubner, however,cautioned: “We don’t expect the rally to be continuous.” He emphasized that Citadel increasingly views the market’s weakness at the start of the quarter as an opportunity rather than a reason to sell stocks.

This article was AI-translated and verified by a human editor