Traders have poured $5 billion into leveraged Nvidia ETFs. They're up 425% even after the stock's big wipeout.
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- Leveraged ETFs that track the performance of Nvidia have soared this year.
- The leveraged funds focused on the AI giant have attracted $5 billion from investors.
- That amount is leagues beyond other single-stock ETFs that track mega-cap tech names.
A new type of exchange-traded fund has made waves over the past year: the leveraged single-stock ETF.
Instead of purchasing a basket of stocks like typical ETFs, these funds focus on a single name and add directional leverage to them, which can juice returns in a big way.
The T-REX 2X Long NVIDIA Daily Target ETF is up 425% year-to-date. That's after Nvidia's 16% correction over the past few days, during which leveraged bets on the chip maker soured, with the fund plunging 30% during the sell-off.
These funds are meant to be short-term day trading instruments, given the amount of leverage that they take on. Yet, retail investors are getting in on the action as well.
The r/LETFs forum on Reddit has 27,000 members, and a recent post asked if one of the Nvidia-focused ETFs is a good "buy and hold."
"I've put some money in NVDL for almost 3 months now. The returns are exceptional but is it a good ETF to hold for a long time?" a Reddit user asked.
The GraniteShares 2x Long NVDA ETF, the T-REX 2X Long Nvidia Daily Target ETF, and the Direxion Daily NVDA Bull 2X Shares ETF have amassed a collective $5 billion in assets under management.
In the ETF world, those are huge numbers, and momentum in Nvidia stock over the past year has helped catapult this particular class of ETFs into the big leagues.
However, that success hasn't exactly translated into the other single-stock leveraged ETFs that target popular mega-cap technology stocks.
For example, the three ETFs that offer double the bullish leverage for shares of Apple have attracted a combined $157 million in assets, while all of the bullish leveraged ETFs that target Alphabet, Amazon, Meta Platforms, and Microsoft have attracted a combined $444 million in assets.
The Tesla-focused single-stock ETFs are the only others that have been able to reach the billion-dollar AUM milestone.
The T-REX 2X Long Tesla Daily Target ETF, the Direxion Daily TSLA Bull 2X Shares, and the GraniteShares 2x Long TSLA Daily ETF have a combined $1.5 billion in assets under management.
But as the long Nvidia ETFs emphasize the potential upside in the leveraged ETFs, bullish Tesla-focused funds have highlighted the opposite
The Direxion Daily TSLA Bull 2X Shares ETF is down 70% since its record high reached in August 2022. Tesla stock, meanwhile, is down 37% over the same time period.