Retail Traders Are Selling Ai Favorites And Piling Up Cash Ahead Of Spacex And Other Mega-ipos

• Retail traders are building up their cash piles in anticipation of SpaceX and other mega-offerings.
• Data from Vanda Research suggests they're selling old favorites to get in position to buy new IPOs.
• Retail traders were net sellers three days in a row this week, the first time Vanda has seen that since 2020.

The SpaceX IPO will offer more shares than usual to the retail crowd, and it looks like they're getting ready to jump at the opportunity to get in early, according to data from Vanda Research.

The research firm, which tracks retail flows in single stocks and ETFs, said that data shows a trend of traders have become net sellers lately, possibly as they gear up to plow money into Elon Musk's rocket company and other major offerings later this year.

"We're already seeing signs that retail investors are rotating out of recent AI favorites ahead of the IPO wave," Vanda said. "Retail are on track for a 3rd consecutive day of net selling across single names — something we haven't seen since March 2020."

Retail hype has been strong, particularly as SpaceX plans to offer 30% of its stock to everyday investors when it prices on Thursday.

Vanda said that it believes the selling can be partially explained by retail traders' need for "dry powder" ahead of the offerings from SpaceX this week and from Anthropic and OpenAI later this year.

However, Vanda also said that retail isn't the only group of investors selling out of high-flying tech names lately.

"Institutional investors are also showing early signs of fatigue in crowded AI longs (namely semis). Given how crowded this trade had become, it hasn't taken much to trigger profit-taking — whilst short sellers are likely emboldened to rebuild positions across parts of the unprofitable tech complex."

Other finance pros have also chalked up the recent tech sell-off to a desire among investors to have cash ready to deploy into IPOs. The volatility that's rattled Wall Street in the last week might be bullish for the deal as investors drain liquidity from one part of the market to make room in their portfolios for SpaceX.

Anticipation for the SpaceX debut has boosted share prices for its competitors in the space-tech sector in the months leading up to the IPO.

"Space-related names are also starting to attract a retail bid, with Virgin Galactic emerging as a new retail favorite," Vanda wrote on June 1. "That wasn't the case when we first highlighted potential beneficiaries of a SpaceX IPO a few weeks ago, when retail interest was much more concentrated in Rocket Lab and Redwire."