ETFs

Leveraged Nvidia Stock ETF Boom Fails to Spread to Tesla and Apple

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  • Leveraged ETFs that track Nvidia’s performance have soared this year.
  • Leveraged funds focused on the AI ​​giant have attracted $5 billion in investors.
  • This amount far exceeds other single-stock ETFs that track large-cap tech names.

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A new type of exchange-traded fund has been making waves over the past year: the leveraged single-stock ETF.

Instead of buying a basket of stocks like traditional ETFs, these funds focus on a single name and add directional leverage to them, which can significantly increase returns.

The T-REX 2X Long NVIDIA Daily Target ETF is up 425% year to date. It is after from Nvidia 16% correction in recent days, during which leveraged bets on the chipmaker deteriorated, with the fund plunging 30% on the sell-off.

These funds are intended to be short-term day trading instruments, given the amount of leverage they exert. Yet retail investors are also getting in on the action.

The r/LETFs forum on Reddit has 27,000 members, and a recent article asked if any of the Nvidia-focused ETFs were a good “buy and hold.”

“I have been putting money into NVDL for almost 3 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, T-REX 2X Long Nvidia Daily Target ETF, and Direxion Daily NVDA Bull 2X Shares ETF have amassed a collective $5 billion in assets under management.

In the world of ETFs, these numbers are huge, and the momentum in Nvidia stock over the past year has helped propel this particular class of ETF into the big leagues.

However, this success hasn’t exactly translated to other single-stock leveraged ETFs that target popular mega-cap tech stocks.

For example, the three ETFs that offer double the bullish leverage for stocks Apple have attracted a total of $157 million in assets, while all bullish leveraged ETFs that target Alphabet, Amazon, MetaplatformsAnd Microsoft attracted a total of $444 million in assets.

THE You’re hereETFs focused on single stocks are the only others that have managed to reach the $1 billion mark in assets under management.

The T-REX 2X Long Tesla Daily Target ETF, Direxion Daily TSLA Bull 2X Stock, and GraniteShares 2x Long TSLA Daily ETF have a total of $1.5 billion in assets under management.

But while long Nvidia ETFs highlight the upside potential of leveraged ETFs, bull funds focused on Tesla have highlighted the opposite.

The Direxion Daily TSLA Bull 2X Shares ETF is down 70% since its record high in August 2022. Tesla stock, meanwhile, is down 37% over the same period.

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