The Battle for Pricing Power in US Stocks: Retail Investors Win

In the first half of 2025, retail investors swept into the U.S. stock market with unprecedented enthusiasm.

According to Vanda Research data, in the first half of 2025, U.S. retail investors injected up to $155.3 billion into individual stocks and ETFs, setting a record for the highest amount in the same period in history. Especially in the second quarter, retail trading activity surged, demonstrating an unprecedented level of market participation.

Retail investors' preference for "buying the dip" remained completely unchanged, with participation in individual stocks—particularly high-beta and leveraged products—continuing to rise.

In terms of individual stocks, NVIDIA, Tesla, and Palantir dominated the inflows so far in 2025. Among them, NVIDIA remained the most favored stock by retail investors, Tesla reclaimed the second position, and Palantir jumped to fourth place.

Retail Inflows Hit New Highs, Individual Stocks Lead the Rebound

Vanda Research data shows that retail inflows into U.S. stocks and ETFs reached $155.3 billion in the first half of 2025, setting the strongest record for the first half of the year. This inflow intensity was initially driven by the narrative of "American exceptionalism," followed by aggressive bottom-fishing behavior from retail investors during the significant pullback around Trump's inauguration.

From the perspective of fund flow structure, individual stock purchases became the main driving force behind the rebound.

Although ETF purchases have continued to grow moderately over the past three years, they have not yet returned to the levels seen in the first half of 2022. In contrast, the volume of individual stock purchases in the first half of 2025 returned to the highs seen during the bull markets of 2021 and the first half of 2023.

This increase in participation is reflected not only in the scale of funds but also in the surge in daily trading volume, with the average daily trading volume in 2025 increasing by 44.5% compared to 2024, setting a new record for retail participation.

Buy-the-Dip Strategy Remains Strong

The tendency for retail investors to buy the dip remained strong in 2025.

Vanda Research analyzed the relationship between daily changes in the S&P 500 and daily net inflows from retail investors, revealing that although not as aggressive as in 2021, the buy-the-dip tendency among retail investors in 2025 remains high.

Specifically, for every 1% decline in the S&P 500, retail investors net inflow $100 million, which, while lower than the $187 million in 2021, still clearly indicates a strong bottom-fishing trend

This phenomenon is partly attributed to the lack of a real pullback in the first half of the year—although the market briefly declined, it only lasted a total of 3-4 days, with stocks rebounding for the rest of the time.

Moreover, when U.S. stocks returned to February highs last week, retail investor activity further heated up, with a net purchase of $8.4 billion in cash stocks. On June 30, there was a sharp surge in demand, with daily net purchases exceeding $3 billion, reaching levels not seen in over a month.

High-risk assets are in demand, and retail portfolios perform in sync with the market

From the perspective of individual stock preferences, NVIDIA continues to top the list of most favored stocks among retail investors, Tesla has reclaimed the second position, and Palantir has become one of the biggest gainers, with purchases increasing by $5.8 billion, rising to fourth place.

Ford Motor has re-entered the top 20, likely driven by automotive tariffs.

Additionally, over the past month, retail investors have become active in trading small-cap high-beta stocks with high volatility, particularly cryptocurrency-related stocks and regional bank stocks.

In terms of ETFs, retail investors have renewed their interest in tech stocks, with significant inflows into the Nasdaq ETF (QQQ) and the largest tech stock ETF (XLK). Options trading activity also remains high, with retail investors selling $2 billion in delta and a record $46 billion in gamma this week.

Regarding preferences for leveraged ETFs, retail investors are shifting from broad-based products to single-stock products. Although the total retail purchases of broad-based leveraged ETFs still lead, the overall flow for single-stock products continues to grow steeply.

Notably, the 2x long Tesla ETF (TSLL) has entered the top 20 for the first time, becoming the first single-stock leveraged ETF to make the list.

Despite the investment preference leaning towards high-risk assets, the performance of retail investor portfolios has not significantly lagged behind the market.

Data from Vanda Research shows that in the first half of 2025, the returns of retail investor portfolios were in line with the S&P 500 index, only about 2% lower than the Nasdaq index.

Looking at the cumulative performance since 2024, the return rate of retail investor portfolios has reached 40%, significantly higher than QQQ's 34% and the S&P 500 ETF (SPY)'s 32%, and even far exceeding the average performance of hedge funds