$7 trillion in funds on standby, waiting for NVIDIA's "judgment day."

NVIDIA's Q1 fiscal report for 2026, released on Wednesday, may become the catalyst for a new round of volatility in the U.S. stock market.

According to BBVA strategist Michalis Onisiforou, the institutional holdings in the U.S. technology sector "are not overly crowded," as hedge funds and mutual funds are still significantly underweight in this sector. Nearly $7 trillion in cash is currently sitting idle in money market funds, ready to be deployed into the stock market.

He also pointed out that trend-following commodity trading advisors (CTAs) have a neutral exposure to the overall stock market, while volatility-controlled funds have plenty of room to increase their risk exposure. Onisiforou stated:

"Institutional long positions in stocks are far from reaching a euphoric level, which creates favorable conditions for a higher exposure to stocks."

Bottom-fishing frenzy! Retail investors net buy $4.1 billion in U.S. stocks in a single day

The S&P 500 index has been rebounding since its April low, primarily benefiting from optimism over easing trade tensions, but fell last week due to concerns over the fiscal deficit and renewed tariff tensions.

Notably, while Wall Street elites were still grappling with Moody's downgrade of the U.S. credit rating, retail investors provided an answer with cash—a net purchase of $4.1 billion in U.S. stocks in a single day, setting a new historical high, forcefully pulling the S&P 500 index back into positive territory from a 1% decline.

Data from JP Morgan shows that $2.5 billion purchased by retail investors on Monday flowed into individual stocks, while $1.5 billion went into exchange-traded funds. Small investors frantically bought their favorites, Tesla and Palantir Technologies, with inflows of $675 million and $439 million, respectively. They also invested in Bitcoin ETFs, but remained net sellers of NVIDIA.

"Retail investors have suffered losses in previous stock market recoveries, and those rebounds supported by policy caught them off guard," said Frank Monkam, head of macro trading at Buffalo Bayou Commodities:

"Now they have an almost unwavering commitment—not to make the same mistakes again."

NVIDIA becomes the market barometer, valuation still attractive

Market focus has now shifted to NVIDIA's Q1 earnings report scheduled for Wednesday, with the $3.2 trillion company seen as a bellwether for AI demand.

Although NVIDIA's stock price has rebounded about 40% over the past seven weeks, it is still approximately 14% lower than the historical high set in January. Data shows that the stock's current price-to-earnings ratio is about 28 times, significantly lower than its five-year average valuation of 40 times.

"I believe retail investors are doing the intuitively correct thing by allocating capital to where they can achieve the most attractive risk-adjusted returns," said Vincent Lorusso, CEO and portfolio manager at Clough Capital Partners. In the context of declining inflation and strong corporate and consumer balance sheets, buying stocks now is a wise move:

"Retail investors are savvy enough to identify this opportunity area."

However, Onisiforou warns that the recent rally has brought the stock close to overbought levels, creating a "challenging backdrop" for the earnings report