JPMorgan: Retail Investors Flood Semiconductors, Extreme Overcrowding in Software Shorts

This week, retail trading activity remained at a historical center level, but capital flows were highly concentrated. ETFs saw a net inflow of $4.6 billion, with SOXX experiencing a weekly inflow deviation as high as +5.0σ, and QQQM reaching +3.4σ. Semiconductor-themed ETFs almost monopolized all the incremental funds this week. The percentile of individual stock purchases rose to 71.4% of the historical percentile, with the driving force coming almost entirely from AI and memory stock concepts.

The memory chip sector was the biggest highlight of the week. Both Micron and SK Hynix's market value broke through $1 trillion simultaneously, but there was no sign of retail investors taking profits. Micron's net retail purchases for the week were $521 million, with a deviation of +3.4σ, ranking it second on this week's individual stock purchase list. J.P. Morgan analysts maintained a constructive outlook, pointing out that the tight supply of HBM, DRAM, and NAND will "far exceed the full year of 2026".

The software sector, on the other hand, played out a completely opposite scenario. Zscaler's stock plummeted by 31.5% during the earnings season, triggering a rare historical bottom-fishing capital flow of +12.0σ on the day, raising the weekly deviation to +5.5σ. Meanwhile, Snowflake's stock soared by 25% to 30% after hours after announcing a $6 billion cooperation agreement with Amazon. These two events point to the same structural risk: the software short concentration has risen to a 99.7% historical extreme percentile. Once a catalyst appears, a comprehensive short squeeze could be triggered at any time.

The quantum computing sector has seen a retail frenzy due to policy dividends. The U.S. Department of Commerce announced $2 billion in funding to 9 quantum companies, with IBM receiving the largest share of $1 billion, and GlobalFoundries receiving $375 million. On the day the news landed, IBM's net retail purchases were $33 million, with a deviation of +4.5σ, and GlobalFoundries' deviation even reached +10.6σ.

The space sector has seen "ETF buying, individual stock selling" as a smart arbitrage. The NASA ETF recorded the largest weekly subscription in history, but retail investors have also cashed out heavily on individual stocks such as ASTS and RKLB, with ASTS's deviation falling to -2.7σ, indicating that retail investors have made a structural shift at high positions in the theme.

Retail options activity is also worth paying attention to. The proportion of retail options trading volume is at a historical extreme of 98.7% percentile, with Micron options hitting a daily record of 60,000 contracts in May. Although there was a brief appearance of hedging net short Delta after the market value broke through $1 trillion, it has returned to neutral this week.

Institutional surveys reveal a deep division. At J.P. Morgan's May Quantitative and AI Annual Conference, 47.5% of institutional investors believe that AI will further widen the gap between themselves and individual investors, and only 14.8% believe that the gap in behavior is the real divide. As for who will be the first to surpass NVIDIA's first place in terms of market value, 35.1% prefer Alphabet, 31.3% bet on OpenAI or Anthropic, and 19.2% are optimistic about space-themed leaders.

This week also saw an undeniable liquidity shock. The largest ever MSCI quarterly index adjustment will take effect this Friday, with developed market two-way positioning reaching $118.4 billion. NVIDIA, Google, and Salesforce are all on the weight reduction list, facing potential selling pressure from passive funds, and individual investors have already net sold $88 million in advance of Amazon.