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Retail investors are booking some profits on several of their favorite stocks.

The analysis: This month, breaking from prior patterns, retail investors have begun trimming their exposure to software stocks, JPMorgan strategist Arun Jain wrote in a note on Thursday. In particular, investors are lightening the load on Microsoft (MSFT) and Palantir (PLTR). Microsoft, for example, has shifted from the second-most-bought stock in April (behind Tesla (TSLA) to the second-most-sold stock month to date in May and the most-sold stock last week.

By contrast, retail investors have continued adding to semiconductor positions this month as names such as Intel (INTC) have soared. Exchange-traded funds (ETFs) such as the iShares Semiconductor ETF (SOXX) and the VanEck Semiconductor ETF (SMH) continue to see strong inflows, while their buying into the Roundhill Memory ETF (DRAM) remained robust after more than quadrupling last week.

Read more: How to protect your portfolio from an AI bubble

Retail is staying engaged with a hot market: In another new note out Thursday, Goldman Sachs strategist Daniel Chavez estimated that retail trading volumes have risen by 28% since mid-April, and a basket of retail favorite stocks has rallied by 29% over the same period.

Meanwhile, retail trading activity has recently accounted for roughly 20% of total US equity trading volumes. This is up from 15% a decade ago but below the peak of 24% in 2021 during the GameStop (GME) meme stock frenzy.

Bottom line: Nothing goes up in a straight line, including momentum stocks such as Palantir.

It’s somewhat refreshing that retail investors are taking a bit of a pause on favorites like Palantir, given the stock’s hefty valuation. Palantir trades on a forward price-to-earnings multiple of 97 times, more than four times the multiple on the S&P 500 (^GSPC).

“I think the biggest risk out there is people are tempted to concentrate in these narrow parts of the market on beliefs that these profits are going to continue forever, which at least historically, has not occurred,” Northwestern Mutual Wealth Management Company chief investment officer Brent Schutte said on Yahoo Finance’s Opening Bid.

“I’m not suggesting don’t own it [tech], but I’m suggesting to make sure that you stay diversified,” Schutte said.

Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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