The hype in AI stocks isn't a bubble yet, and little buy in from retail investors means there's room for more upside

"There's not enough retail interest to indicate a bubble is forming, and there's a lot more room for retail investors to get involved in these names."

• The hype in artificial intelligence is real, but hasn't yet formed a bubble in stocks tied to the sector, according to DataTrek.
• The research firm said retail investors have yet to pile into AI stocks and fuel a bubble frenzy like they did during the pandemic.
• "Interest in 'tech stock' is nowhere near levels reached during the Pandemic Era speculative tech bubble," DataTrek said.

The hype in artificial intelligence is real, but that has yet to spill over into the stock market despite year-to-date rallies in mega-cap tech stocks like Microsoft, Alphabet, and Nvidia, according to DataTrek Research.

That's because retail investors have yet to pile into the space as they're still licking their wounds from the 2022 stock market meltdown, and it could ultimately mean that there's more upside left in these stocks as investors wade back into the market.

DataTrek's research in a Wednesday note is based on various Google Trend Search queries, which shows the keyword "ChatGPT" far outpacing the search interest in bitcoin, while the keyword "tech stocks" continues to trend lower from its peak in February 2021, when high-flying speculative tech stocks ultimately peaked.

"Interest in 'tech stock' is nowhere near levels reached during the Pandemic Era speculative tech bubble," DataTrek Research co-founder Jessica Rabe said. "While there's been bursts in attention following the peak in February 2021, they continue to get smaller."

According to Rabe, that means institutional investors have likely been driving the recent upside in AI-related technology stocks, meaning that there's plenty of upside potential left if retail investors get more involved in the space.

"For those worried about another tech bubble, this [Google Trends search] chart says that is very far off," Rabe said.

And this time around, there's more meat on the bone for artificial intelligence given its massive implications for all aspects of business than there was for recent tech trend hype surrounding the metaverse, cryptocurrencies, and Web 3.0. 

"ChatGPT has much wider applications so its appeal is more permanent, whereas general focus on bitcoin is heavily correlated with price," Rabe explained.

"It remains to be seen how generative AI will impact both corporate profitability and productivity, or expand and shrink competitive moats, but gen AI targets the largest total addressable market since the smartphone," Rabe said.

In other words, they hype around AI is real given how transformative the recently tech launches from OpenAI and Alphabet have been.

Finally, Google Trend Search data for individual stock tickers like MSFT, GOOG, and NVDA have trended higher since the start of the year but are still well below their peaks in early 2022.

"Like 'tech stock', attention is nowhere near all-time highs. In other words, not enough retail investors have been sucked into these Big Tech stocks yet to indicate a bubble," Rabe said. "On the plus side, there's not enough retail interest to indicate a bubble is forming, and there's a lot more room for retail investors to get involved in these names."