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Tiny Bubbles and the Madness of Reddit Crowds

Published on January 30, 2026

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By

Dennis DeBusschere

Brian Herlihy

Kevin Brocks

Sophia Wang

DAILY STRATEGY: Academic research has connected social media dynamics to the principles of “swarming,” users collectively forming opinions, trends, and movements without centralized control (HERE). This appears in retail trading, which is becoming a larger share of flows (HERE). We are assuming this is part of the story in the biggest AI basket movers to start the year – precious metals, nuclear, and memory – because there has been a significant spike in trading volume in those baskets. This is one of the challenges institutional investors are facing.

Individual stock implied volatility is at its 99th percentile relative to index vol, which we take as another sign of heightened retail influence. Accelerated turnover rates and high single stock implied vol has led to much higher realized vol and worse forward returns in Momentum baskets in the past – most recently in November of 2025.

If the spike in single name vol starts to fade and price momentum consolidates, like it did in 4Q25, the below industry groups would be most at risk. Value also has a high correlation to Momentum right now, leaving it at risk of consolidating.

A graph showing the number of different types of exposures

AI-generated content may be incorrect.

FYI – Software’s turnover rate – shares traded/shares outstanding – shows the opposite pattern. There’s currently no interest in these companies. Jordi Visser, 22V’s AI expert, and John Roque, 22V’s technical analyst, both expect weakness in Software to continue (HERE). John Roque is still targeting IGV at 80, another -11% from here.

More charts…

Here is Morgan Stanley’s AI Power basket turnover rate, demonstrating the spike in trading volume.

Single stock implied vol is at its 99th percentile relative to index vol.

The last time this happened, Mo underperformed and its realized vol increased.

A graph with numbers and lines

AI-generated content may be incorrect.

Value is correlated with Momentum right now, increasing its risk of consolidation if the 4Q pattern repeats itself.

Software does not see the same spike in trading volume. This group is being left behind.

Source: FactSet, 22V Research

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