March 7, 2024 – 7:51 AM PST
(Reuters) – Investors have piled into Nvidia-focused exchange-traded funds (ETFs) this year on the frenzy around AI, with inflows into a bullish fund that tracks the shares of the chip designer hitting an all-time high on Wednesday.
Net daily inflows into the GraniteShares 2x Long NVDA Daily ETF (NVDL.O) hit a record of $197 million, according to LSEG Lipper data. The assets managed by the ETF have grown to $1.41 billion from $213.75 million at the start of the year.
WHY IT’S IMPORTANT
Risk-averse investors have largely stayed away from leveraged ETFs tracking single stocks that aim to provide returns over extremely short periods.
These ETFs, which made their U.S. debut in 2022, have become popular among speculators looking to bet on the most volatile shares based on earnings and other news.
CONTEXT
Nvidia (NVDA.O) which controls about 80% of the high-end AI chip market, has surged nearly 82% since the start of the year after a stellar forecast and amid renewed euphoria around AI.
Leveraged single-stock ETFs seek to amplify the returns of an underlying stock for a single day, generally by two or three times, using financial derivatives and debt as leverage.
KEY QUOTES
“Nvidia has been the hottest stock in 2024 and many investors are eager to seek out higher returns in exchange for added risk,” said Todd Rosenbluth, chief ETF strategist at VettaFi.
“We expect to see continued demand for single stock leveraged ETFs as a new wave of must-own companies emerge.”
THE NUMBERS
Net monthly inflows into leveraged ETFs tracking Nvidia such as the GraniteShares 2x Long NVDA ETF, the Direxion Daily NVDA Bull 1.5X Shares ETF (NVDU.O) and the T-Rex 2X Long Nvidia Daily Target ETF hit a record in February.
The GraniteShares ETF has already crossed its net monthly flow record within the first six days of the month.
Assets of the three Nvidia-linked ETFs jumped between five and 11 times since the start of 2024, while their prices are up between 143% and 218% year-to-date, outperforming other ETFs.
Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva