Written by Bhansali Mayur Kamdar
(Reuters) – Investors have been flooding into Nvidia-focused exchange-traded funds (ETFs) this year to ride the frenzy over AI, with a bullish fund tracking the chip designer’s stock on Wednesday. Inflows hit a record high.
Daily net inflows into the GraniteShares 2x Long NVDA Daily ETF reached a record $197 million, according to data from LSEG Lipper. Assets managed by ETFs increased to $1.41 billion from $213.75 million at the beginning of the year.
Why is it important?
Risk-averse investors rarely dabble in leveraged ETFs that track single stocks and are designed to deliver very quick returns.
These ETFs, which debuted in the U.S. in 2022, have become popular among speculators looking to bet on the most volatile stocks based on earnings and other news.
context
Nvidia, which controls about 80% of the high-end AI chip market, has soared nearly 82% since the start of the year amid renewed excitement around AI following stellar forecasts.
Leveraged single-stock ETFs use financial derivatives and debt as leverage to seek to amplify the underlying stock’s daily return, typically by two or three times.
important quotes
“NVIDIA is the hottest stock in 2024, with many investors looking for higher returns in exchange for additional risk,” said Todd Rosenbluth, chief ETF strategist at Bettafi.
“We expect demand for single-stock leveraged ETFs to continue as a new wave of companies to own emerges.”
numbers
Monthly net inflows into leveraged ETFs tracking Nvidia, including GraniteShares 2x Long NVDA ETF, Direxion Daily NVDA Bull 1.5X Shares ETF, and T-Rex 2X Long Nvidia Daily Target ETF, hit a record in February.
The GraniteShares ETF has already surpassed monthly net flow records in the first six days of the month.
Assets in the three Nvidia-linked ETFs have soared 5-11x since the beginning of 2024, with prices up 143%-218% year-to-date, outpacing other ETFs.
(Reporting by Bhansali Mayur Kamdar in Bengaluru; Editing by Anil D’Silva)
