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Leveraged ETFs tracking Nvidia’s performance have soared this year.
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The leveraged funds focused on the AI giant have attracted $5 billion from investors.
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This amount is leagues beyond other single-stock ETFs that track huge technology names.
A new type of exchange-traded fund has been making waves over the past year: the single-stock ETF.
Instead of buying a basket of stocks like a typical ETF, these funds focus on a single name and add directional leverage to it, which can generate outsized returns.
The price of the T-REX 2X Long NVIDIA Daily Target ETF is up 425% year to date. This is yet Nvidia There has been a 16% correction over the past few days, during which bets on the chipmaker have deteriorated, with the fund falling 30% during the sell-off.
These funds are intended to be tools for short-term day trading, due to the amount of leverage they use. However, individual investors are involved in this activity as well.
The r/LETFs forum on Reddit has 27,000 members Recent post He was asked if one of the Nvidia-focused ETFs was a good “buy and hold” option.
“I’ve invested some money in NVDL for about 3 months now. The returns are exceptional but is it a good idea to hold an ETF for a long time?” asked a Reddit user.
The GraniteShares 2x Long NVDA ETF, T-REX 2X Long Nvidia Daily Target ETF, and Direxion Daily NVDA Bull 2X Shares ETF have combined assets under management of $5 billion.
In the world of ETFs, those are huge numbers, and the momentum in Nvidia stock over the past year has helped propel this particular class of ETFs into the big leagues.
However, this success hasn’t exactly translated to other leveraged ETFs targeting popular mega-cap technology stocks.
For example, the three ETFs that provide twice the upside leverage for stocks apple Attracted combined assets of $157 million, while all bullish leveraged ETFs target the alphabet, Amazon, Meta platformsAnd Microsoft They attracted combined assets of $444 million.
the TeslaSingle-stock ETFs that focus on stocks are the only other funds that have managed to reach the $1 billion level of assets under management.
The T-REX 2X Long Tesla Daily Target ETF, Direxion Daily TSLA Bull 2X Shares, and GraniteShares 2x Long TSLA Daily ETF each have a total of $1.5 billion in assets under management.
But as long Nvidia ETFs emphasize the potential upside in leveraged ETFs, bullish Tesla-focused funds have highlighted the opposite.
The Direxion Daily TSLA Bull 2X Shares ETF is down 70% since hitting its record high in August 2022. Meanwhile, Tesla stock is down 37% over the same time period.
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