Institutional Investors Defy Bond Selloff, Pour $18.4B into US Stock Options, AI Still Top Pick

According to the latest data, institutional investors are increasingly taking the reins in the U.S. stock market.

After years of strong buying activity, retail traders appear to be gradually stepping to the sidelines. Meanwhile, data from Vanda Research shows that large investors continue to hold stocks steadily, even amid a surge in U.S. Treasury yields.

"In the face of heightened macro volatility this week, institutional investors have shown surprising resilience," Vanda Research global markets strategist Viraj Patel wrote in a note to clients on Friday.

The data reveals that institutional investors' options inflows reached $18.4 billion—approximately three times the September average.

Patel noted that despite 10-year and 30-year U.S. Treasury yields climbing to their highest levels in over a decade, large capital inflows have continued to rise over the past five trading sessions. He described this as a "fairly constructive signal" of institutional risk appetite hidden beneath the broader risk-off narrative.

Institutional Investors Focus on AI-Related Stocks Amid Market Turmoil

Patel added that amid market turbulence, institutional traders are selectively positioning in artificial intelligence (AI)-related stocks.

He specifically highlighted Meta Platforms (META.US) as one of the top picks last week, which is on track to record its third-largest weekly volume of institutional bullish options buying in two years. The Facebook parent company's stock surged nearly 13% in the week following the launch of its Muse Charm device. The upward momentum has continued to build since Meta released its Muse personal AI agent earlier this month.

Over a four-day trading span, institutional net bullish options exposure to Meta increased by $603 million. This aggressive positioning ranked second only to Micron Technology (MU.US) across the entire market. Meta's total call option volume surged 243% compared to the previous week.

"Macro uncertainty hasn't stopped risk-taking," Patel said. Instead, "it has made investors more selective in their stock-picking."

Retail Traders' Market Share Declines

Retail traders posted strong returns in 2025, leading many to declare that they had shed the label of "dumb money." Investors attributed part of their strong performance to buying the dip during market corrections triggered by tariff policies introduced by the Trump administration.

However, Goldman Sachs data shows that retail investors' share of total S&P 500 trading volume has continued to decline from its peak nearly a year ago. The bank found that this share is now more than 3 percentage points below the five-year average.