Stock market FOMO is back among average investors as AI and tech drive biggest stock market inflows in 3 months

• "AI and tech FOMO looks to be kicking in" among retail investors, Vanda Research said Thursday.
• Net inflow from that group hit $1.48 billion in Wednesday's session, the highest in three months.

Individual investors may be stepping off the sidelines of the equity market as rallies in AI and technology stocks give rise to fear of missing out, Vanda Research said Thursday.

While the snapshot was for one day, retail investors appeared to have bought the dip in Wednesday's trading session "with conviction," the firm wrote. Net inflow of $1.48 billion was the highest amount in about three months.

Vanda said average investors are beginning to chase the boom in tech stocks by widening their purchases across more AI-sensitive names including Palantir, Marvell and UIPath and beyond large-cap issues.

At the center of the AI investment frenzy is chipmaker Nvidia whose valuation this week pushed beyond $1 trillion. The stock has soared about 160% this year.

"AI and tech FOMO looks to be kicking in" following lackluster retail flows since the end of February, Marco Iachini, Vanda's senior vice president of research, said in the note.

But it flagged that profit-taking could put downward pressure on some of the market's smaller and best-performing AI stocks such as C3.ai. Shares of the software company plunged Thursday by more than 20% on underwhelming financial guidance to investors. Ahead of its fiscal fourth-quarter report, C3.ai shares had jumped 258% year-to-date.

Vanda last week said its in-house US equity positioning showed retail investors weren't jumping full-force into the AI investing craze. They appeared to be cautious because of economic worries, including the stalemate in Washington over raising the debt ceiling.

"Over the past week, those conditions have shaped up quite nicely, resulting in Wednesday's robust retail turnout," Vanda said on Thursday.