Nvidia‘s exponential growth has triggered a staggering increase in assets for ETFs that amplify exposure to the AI giant, making these funds a preferred choice among retail traders. Despite recent market fluctuations, trading volumes have soared to record highs, underscoring the enduring popularity of Nvidia within the ETF landscape. According to Bloomberg Intelligence, the stock’s prominence has become a decisive factor in distinguishing top-performing ETFs from their peers, with a significant majority benefiting from substantial Nvidia holdings.
In a period marked by Nvidia’s $400 billion market correction, concerns over the company’s trajectory linger amidst heavily crowded momentum trades. Nevertheless, funds offering double the daily returns of Nvidia have attracted substantial investor inflows. For instance, the GraniteShares 2x Long NVDA Daily ETF (NVDL) has seen its assets surge from $220 million to over $5 billion this year, reflecting a massive influx of approximately $2.7 billion. Similarly, the T-Rex 2X Long NVIDIA Daily Target ETF (NVDX) has garnered over $300 million in inflows year-to-date.
Eric Balchunas of Bloomberg Intelligence notes that NVDL has consistently ranked among the top 15 most-traded ETFs, exchanging more than $10 billion worth of shares in just five recent trading sessions. Conversely, ETFs with minimal or no exposure to Nvidia have struggled to keep pace, with the top-performing funds heavily weighted towards the AI sector seeing average weights of nearly 7% in Nvidia stocks.
Athanasios Psarofagis of Bloomberg Intelligence highlights that Nvidia has been a pivotal driver for ETF outperformance over the past 18 months, with only a handful of niche funds managing to surpass benchmarks without Nvidia’s influence. These include specialized ETFs focusing on digital assets like the VanEck Digital Transformation ETF (DAPP) and thematic funds centered on IPOs, cloud computing, and cybersecurity.
A striking example of performance divergence can be seen in the Amplify AI Powered Equity ETF (AIEQ), which employs an AI-driven model to select holdings but notably excludes Nvidia from its portfolio. Despite including tech giants like Microsoft Corp. and Qualcomm Inc., AIEQ has lagged behind broader indices, reflecting missed opportunities in Nvidia and other leading AI stocks.
Jessica Rabe, co-founder of DataTrek Research, comments on AIEQ’s exclusion of Nvidia and similar AI beneficiaries like Alphabet Inc. and Broadcom Inc., suggesting that this oversight has contributed to its underperformance relative to benchmarks heavily weighted in these sectors.
In conclusion
Nvidia’s ascendancy continues to reshape the ETF landscape, amplifying both opportunities and challenges for investors navigating the evolving dynamics of AI-driven investments.
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