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Leveraged ETFs tracking Nvidia’s performance have soared this year.
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The leveraged funds targeting the AI giant have attracted $5 billion from investors.
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That amount is far above other single-stock ETFs that track mega-cap tech names.
A new type of exchange-traded fund has been making waves this past year: the leveraged single-stock ETF.
Instead of buying a basket of stocks like typical ETFs, these funds focus on a single name and add directional leverage, which can massively undermine returns.
The T-REX 2X Long NVIDIA Daily Target ETF is up 425% this year. That’s after Nvidia’s 16% correction in recent days, as leveraged bets on the chipmaker deteriorated while the fund tumbled 30% during the sell-off.
These funds are intended as short-term day trading instruments, given the amount of leverage they exert. Yet private investors are also taking action.
The r/LETFs forum on Reddit has 27,000 members, and a recent post asked whether any of the Nvidia-focused ETFs are a good buy and hold.
“I have invested some money in NVDL for almost three months now. The returns are exceptional, but is it a good ETF to hold for a long time?” asked one Reddit user.
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 collectively built $5 billion in assets under management.
In the ETF world, those are huge numbers, and the 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 to the other leveraged ETFs that focus on popular mega-cap tech stocks.
For example, the three ETFs offering double bullish leverage on Apple stock have attracted a combined $157 million in assets, while all the bullish leveraged ETFs targeting Alphabet, Amazon, Meta Platforms, and Microsoft have attracted a combined $444 million in assets. assets.
The Tesla-focused single-stock ETFs are the only others that have been able to reach the billion-dollar mark under management.
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 while the long Nvidia ETFs highlight the potential upside of the leveraged ETFs, bullish Tesla-focused funds have highlighted the opposite
The Direxion Daily TSLA Bull 2X Shares ETF is down 70% since its all-time high in August 2022. Tesla stock is down 37% over the same period.
Read the original article on Business Insider
