(Bloomberg) — Nvidia Corp.’s latest madness is fueling an unprecedented rally in the booming industry of highly leveraged ETFs, as retail traders go all-in on the world’s ‘most important stocks’.
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A GraniteShares fund, which offers investors twice the daily returns of the Jensen Huang-run firm, is now up 450% in the past year, with a record trading volume of $4.7 billion last week. The $2.8 billion GraniteShares 2x Long NVDA Daily ETF (ticker NVDL) launched in December 2022.
Nvidia, the poster child of the artificial intelligence craze, is pushing the bull market to multiple records, with the now $2.8 trillion chipmaker releasing another blockbuster earnings report as bullish call options soar. On the other hand, the bears have been crushed by the GraniteShares 2x Short NVDA Daily ETF (NVD), which tracks the daily inverse returns of the underlying stocks, down 86% this year alone.
Read more: Nvidia stock surge fueled by short-lived call option squeeze
As speculative euphoria hits the markets, the creator behind the improved products is preparing an avalanche of new options-based strategies that track everything from gold and Big Tech to Bitcoin.
In other words, Nvidia is increasingly becoming the new Tesla Inc. as tech-bullish retailers pile into new ETF strategies.
“If we were having this conversation three years ago, I would say we would be talking exclusively about Tesla. There was the enthusiasm. That’s where all the flows happened,” GraniteShares CEO Will Rhind said on Bloomberg Television’s ETF IQ. “It’s clear that the whole conversation is dominated by Nvidia, which is why I think Nvidia is the most important stock in the world right now. And it goes without saying that we have an ecosystem around Nvidia.”
Leveraged funds have become popular this year, generating $11 billion in inflows so far, which is on pace to keep pace with last year’s $20 billion, according to data compiled by Bloomberg Intelligence. Demand for these types of funds has increased as investors look for new tools to bet on the market’s biggest themes. But they have also received mixed reviews, in part because they expose retail traders – who are often labeled as less sophisticated than institutional investors – to high risks.
GraniteShares has applied for at least 25 ETFs that track the performance of other single-stock ETFs that employ daily 2x and 3x leverage strategies.
“What we offer is institutionally priced leverage for the masses – that’s the big breakthrough,” he added. “With leverage comes risks, and these products are not without risk.”
–With help from Denitsa Tsekova.
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