Has the hot trend of AI in the US stock market started to fade? Retail investors are beginning to distance themselves from AI.
ChatGPT's user base and user engagement have recently started to decline. It seems that retail investors in the US stock market are beginning to realize that artificial intelligence is not as intelligent as they thought, and that the era of artificial intelligence has not yet begun. Nowadays, research institutions have found that retail investors are more interested in sectors such as electric vehicles rather than artificial intelligence.
On Wednesday, July 12th, Goldman Sachs trader Bobby Molavi dedicated a paragraph in his weekly analysis of US stocks to discuss artificial intelligence:
There isn't a week that goes by without mentioning artificial intelligence, but the headlines related to AI seem to be decreasing, and the attention towards AI is also diminishing. The fluctuations in the stocks of related companies are gradually returning to normal.
According to Similarweb's data, ChatGPT's website traffic decreased by 9.7% from May to June. This is the first monthly decline in traffic for this revolutionary AI portal since it gained widespread attention in November last year.
The engagement of ChatGPT's visitors is also declining. Similarweb hasn't displayed the data for June yet, but it already showed an 8.5% decrease in May compared to the previous month.
Analysts at Similarweb stated:
In June, after experiencing several months of astonishing growth, ChatGPT's traffic and engagement finally started to decline. Prior to this, the chatbot had gained 100 million users within its initial months of operation.
Gary Marcus, Honorary Professor of Psychology and Neuroscience at New York University, believes that users are realizing that current generative AI is not as intelligent as it seems, and it's only a matter of time:
The intelligence of artificial intelligence has been exaggerated. Although we will eventually achieve this goal, we are still far from it.
There is no doubt that generative AI tools are having a significant impact on our lives, whether positive or negative. They generate high-quality content but also produce erroneous information. Overall, the intelligence of AI has been overstated.
We are still far away from achieving general artificial intelligence. The belief that general AI is just around the corner is almost certainly wrong.
What's even worse, Marcus warns that he is most concerned about the subtle ways in which we are transferring immense power to the few companies currently controlling AI, possibly without even realizing it.
Retail investors also seem to be aware of the issues surrounding the AI frenzy. As stated in the latest weekly report by Vanda Research, which focuses on strategies and macro research, retail investors continue to actively pursue broader gains in US stocks and invest through stock ETFs. This indicates that they not only have confidence in specific themes but also in the overall US stock market. Meanwhile:
We are also starting to see signs of a shift from AI stocks to other stocks such as electric vehicles. According to Vanda's statistics, the average monthly net inflow into the US stock market is currently $1.4 billion per day, close to the historical record of $1.5 billion per day set in March last year.
By carefully observing the flow of funds, we can see "some early signs of sector rotation." Vanda specifically points out:
Retail investors often engage in sector rotation in the short term. Recently, the delivery volume of electric vehicle companies such as Tesla has exceeded expectations, becoming a catalyst for capital inflows into this sector. In fact, Tesla has seen a large influx of funds and has consistently been the most popular stock among retail investors. Additionally, other less popular electric vehicle stocks like Rivian Automotive have just started to rebound, partly due to rotation from popular artificial intelligence stocks that have been rising for weeks and may be considered less interesting.
Demand for artificial intelligence concept stocks itself is also slowing down. For example, retail investors' demand for chip stocks like AMD, which are not AI concept stocks, is increasing, rather than Nvidia. Vanda believes:
For AMD, there may be greater room for retail demand in the future, as long as institutional investors do not actively short this chip manufacturer, the stock's performance may outperform its peers as a result.
At the same time, Vanda has noticed that retail demand for other popular artificial intelligence products like C3.ai is also weakening. The institution warns:
Once the upward momentum of such stocks stagnates for a considerable period of time, institutional investors may actively short this stock or similar artificial intelligence companies, triggering a rapid and intense sell-off.