Retail investors exit, institutions take over! Amid the US Treasury storm, "smart money" moves in instead of withdrawing: $18.4 billions in options capital flows into US stocks, AI remains the top choice.

According to the latest data obtained by Zhitong Finance APP, institutional investors are now taking the lead in the US stock market trend.

After years of strong buying activity, retail traders appear to be gradually stepping back from the market. Meanwhile, data from Vanda Research shows that large investors are still steadily holding stocks despite the surge in US Treasury yields.

"Amid heightened macro volatility this week, institutional investors have demonstrated surprising resilience," Vanda global market strategist Viraj Patel wrote in a report to clients last Friday.

Data shows that institutional investors’ inflows into options reached 18.4 billion USD, about three times the average for September in previous years.

Patel stated that despite the 10-year and 30-year US Treasury yields climbing to their highest levels in over a decade, large capital inflows have continued to rise over the past five trading days. He believes this is a "fairly constructive signal" hidden within institutional investors' risk appetite, against the backdrop of a broader risk-off narrative.

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

He specifically pointed out that Meta Platforms (META.US) was one of the top picks last week and is set to record the third largest single-week bullish options purchase by institutions in the past two years. Shares of the Facebook parent company surged nearly 13% in the week after the launch of the Muse Charm device. Since Meta released its Muse personal AI assistant earlier this month, the stock's upward momentum has continued to build.

Within the span of four trading days, institutions increased their net bullish options exposure on Meta by 603 million USD. This aggressive position was only second to Micron Technology (MU.US) in the entire market, while Meta’s total bullish options trading volume soared by 243% compared with the previous week.

"Macro uncertainty hasn’t stopped risk-taking behavior," Patel said. On the contrary, "it has made investors even more selective in stock picking."

Retail trading share shrinks

Retail traders delivered an outstanding performance in 2025, to the point where many claim they've shed the "dumb money" label. Investors attribute their strong showing in part to buying during market pullbacks triggered by tariff policies introduced by the Trump administration.

But data from Goldman Sachs shows that retail investors' share of total trading volume in the S&P 500 index has continued to decline from the peak nearly a year ago. The bank found that this proportion is currently more than three percentage points below the five-year average.