Retail Investors Aren’t Done With AI. But They’re Suddenly Hedging Their Bets.

Retail investors who spent years enthusiastically buying technology dips are not walking away from the artificial intelligence boom. But new trading data suggests they are becoming considerably more careful about how much risk they are willing to take.

According to a CNBC report citing data from Vanda Research and Charles Schwab, individual investors are still positioning for gains in AI-linked stocks while increasingly using put options and inverse exchange-traded funds to protect against a market downturn.

The shift marks a notable change from the aggressive "buy the dip" behavior that helped define retail trading during previous market pullbacks. "Retail investors are selectively trading in the classic AI theme but also adding downside protection via options and inverse ETFs," Kaidi Meng, Vanda Research's global equity strategist, told CNBC.

Meng said retail investors previously tended to buy major declines with relatively little hesitation. In 2026, however, traders appear more willing to move rapidly between stocks or combine purchases of individual shares with protective options positions.

Since April, put buying among the 12 stocks most favored by retail investors this year has nearly doubled compared with the first quarter, according to Vanda. Put buying climbed to 110% of net cash buying, up from roughly 26%, even as investors reduced their outright purchases of stocks.

A put option gives its holder the right to sell an asset at a predetermined price before a specified date, making it one way investors can protect themselves against falling prices. Retail traders are also changing how they use ETFs.

Since mid-April, purchases of both bullish and bearish technology ETFs, including leveraged products, have declined. But bullish activity has dropped much faster, falling roughly 50%, compared with a decline of about 35% for bearish ETFs.

Meng said those flows suggest investors are reducing outright exposure rather than simply piling on additional hedges. That could reflect profit-taking following years in which buying market declines proved lucrative, or a shift toward riskier corners of the market, including speculative stocks and leveraged ETFs.

Still, the growing caution should not be confused with a wholesale retreat from stocks or AI. Charles Schwab's data points to a retail investor who remains willing to buy. The Schwab Trading Activity Index, or STAX, increased for a third consecutive month in July, reaching 59.80 from 59.12 in June. That was its highest reading since January 2022.

Schwab clients were also net buyers during the month, with more than two buyers for every seller. But they were not buying everything indiscriminately. Schwab found that traders were more willing to buy dips in technology stocks that had experienced sharper declines while showing less enthusiasm for companies whose shares remained relatively rangebound.

One particularly notable absence was Nvidia. The AI chip giant had routinely ranked among the five most popular stocks in STAX but fell out of that group in July. Schwab also detected a modest increase in put buying on the Invesco QQQ Trust during the week of August 7, according to Joe Mazzola, the firm's head trading and derivatives strategist.

At the same time, investors continued selling puts on individual AI-related companies including Nvidia, Micron and Sandisk, while buying cheaper QQQ puts as protection against a broader technology-sector decline.

The combination suggests investors are trying to maintain exposure to another potential AI rally while buying insurance in case the trade suddenly reverses. "Put selling and call buying, so they're trying to position themselves for an additional rally," Mazzola told CNBC.

Fidelity Investments is seeing continued interest in leveraged and inverse ETFs as well. Bryan Koplin, Fidelity's head of advanced trading, told CNBC that while such products can serve as portfolio hedges, active traders also frequently use them to make direct bets on where markets are headed.