In today's market, while valuations are important, there are other factors impacting the movement of stocks, such as investment flows and sentiment. Part of this has to do with the rise of exchange-traded funds (ETFs), passive investing, and algorithmic trading. Understanding sentiment is important because it tells investors where flows are focused and what companies could be prone to big moves.
The large brokerage Interactive Brokers recently released data showing the 25 hottest stocks on its platform. The data is from July 8 and examines the preceding five business days. Here are the five most actively traded stocks on the platform.
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1. Tesla
It shouldn't surprise anyone to see Tesla (TSLA +2.45%) as the No. 1 stock on the list. The company and its outspoken CEO, Elon Musk, captivated the minds of investors as one of the first companies to make electric vehicles mainstream, and now as a company positioned to commercialize robotaxis and humanoid robots.
NASDAQ: TSLA
Key Data Points
Musk's foray into politics this year created lots of controversy as well. With the stock trading at a meteoric valuation, Tesla became a battleground stock. Some think future initiatives like robotaxis and humanoid robots mean the sky is the limit. Others think the stock is a sell, especially with the core EV business struggling this year. While I wouldn't recommend shorting the stock because it has rarely traded on fundamentals, I remain on the sidelines due to the massive valuation.
2. Nvidia
Another obvious stock on this list is the artificial intelligence chip giant Nvidia (NVDA 4.43%), which is the largest publicly traded company and recently touched a $4 trillion market cap.
The market clearly thinks AI will revolutionize society as we know it. As the market opportunity gets bigger, investors are likely to keep driving up the price of Nvidia, which is the pre-eminent maker of the graphics processing units (GPUs) that train large language models (LLM).
NASDAQ: NVDA
Key Data Points
Trading close to 38 times forward earnings, Nvidia is not that far above its five-year average. But below the surface are questions about the company's ability to maintain its monopoly and keep charging as much for chips as it has been. Nvidia also has other opportunities in autonomous driving and robotics that investors are starting to take notice of. I think investors can keep buying Nvidia but should probably take a dollar-cost averaging approach.
3. Circle
The stablecoin company and issuer of USDC, one of the largest stablecoins, has been quite popular since going public in June. Circle's (CRCL 5.07%) stock has already surged 554% from its initial public offering price of $31 per share.
Stablecoins, which are digital assets pegged to commodities or currencies, are viewed as the next major innovation in payments. Like cryptocurrencies, they have the ability to transfer money anywhere in the world, as long as the person or business has internet access. The associated fees are also lower than traditional payment methods. This makes stablecoins useful for people without access to the traditional banking system and for cross-border payments.
While stablecoins certainly have tremendous potential, Circle seems to have run too far too fast right now. USDC has a nearly $62 billion market cap, and Circle is now at about a $45 billion market cap. Furthermore, lower interest rates could decrease Circle's revenue, which is made by earning yield on the reserve currencies backing its stablecoins.
4. Palantir Technologies
The AI decision-making company Palantir Technologies (PLTR +0.83%) has appeared invincible, with its stock up 86% this year. The company's various platforms have the ability to pull in data from a variety of different sources, organize it in a central place, and derive insights using AI and machine learning. Palantir can examine potential scenarios, recommend actions, and then analyze the possible repercussions.
Palantir's platforms are easy to use for people who don't have experience working with LLMs. They can also track how certain data projects were created so they can be easily replicated or taken over by new managers. The company's products have been used by many different government departments and are resonating strongly with the business community as well.
NASDAQ: PLTR
Key Data Points
Palantir trades at an even higher valuation than Tesla at 234 times forward earnings. I don't personally buy stocks at these kinds of valuations, but I also do see immense potential for the company. If you buy Palantir, I would once again take a dollar-cost-averaging approach.
5. Robinhood
The online brokerage Robinhood (HOOD +2.37%) blasted 138% higher this year, partly due to the crypto boom caused by President Donald Trump's administration's pro-crypto policies. The friendlier regulatory approach will make it easier for Robinhood to sell more cryptocurrencies on its platform, which could draw in more users and drive more activity among the company's existing user base.
As the pioneer of commission-free trading, Robinhood has never had issues bringing users to the platform. But more recently, the company has been able to better monetize users, primarily with the company's monthly $5 Robinhood Gold memberships, which offer users margin investing, competitive yield on brokerage cash, and many trading tools. The company has a very high conversion rate for new users signing up to become Gold members.
The Robinhood Gold Credit Card offers 3% cash back on all purchases, while the company also offers up to a 3% match on annual contributions to a Robinhood individual retirement account (IRA).
All of these features have made Robinhood an attractive place for people to conduct their banking activities. The stock isn't cheap, trading at 63 times forward earnings, but I do think the company has executed well and is driving an intriguing investment story.
