Inflows into bullish Nvidia ETFs hit record on AI craze

 Investors have poured into Nvidia-focused exchange-traded funds (ETFs) this year due to the frenzy around AI, with inflows into bullish funds following the chip designer's shares hitting an all-time high on Wednesday.

Daily net inflows into the GraniteShares 2x Long NVDA Daily ETF (NVDL.O), opens a new tab, hit a record $197 million, according to LSEG Lipper data. Assets managed by ETFs have grown to $1.41 billion from $213.75 million at the start of the year.

WHY THIS IS IMPORTANT
Risk-averse investors largely avoid leveraged ETFs that track single stocks that aim to deliver returns over very short time frames.
This ETF, which debuted in the US in 2022, has become popular among speculators looking to bet on the most volatile stocks based on earnings and other news.
CONTEXT
Nvidia (NVDA.O), opens a new tab, which controls about 80% of the high-end AI chip market, has surged nearly 82% since the start of the year after stellar forecasts and amid renewed euphoria around AI.

Leveraged single-stock ETFs seek to amplify the returns of the underlying stock in a single day, generally by two or three times, using financial derivatives and debt as leverage.
KEY QUOTES
“Nvidia has become the hottest stock of 2024 and many investors are looking for higher returns in exchange for additional 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 emerges.”
THE NUMBERS
Net monthly inflows into leveraged ETFs tracking Nvidia such as the GraniteShares 2x Long NVDA ETF, Direxion Daily NVDA Bull 1.5X Shares ETF (NVDU.O), opens a new tab and T-Rex 2X Long Nvidia Daily Target ETF hit records in February.
The GraniteShares ETF has surpassed its monthly net flow record in the first six days of the month.
The assets of the three Nvidia-linked ETFs have surged between five and 11 times since the start of 2024, while their prices are up between 143% and 218% this year, outperforming the other ETFs.