Single-stock ETFs betting heavily on Nvidia’s blistering rally plunged, tracking losses in the AI chip makers shares, calling into question the reliability of the leveraged investment strategy.
The GraniteShares 2x Long NVDA Daily ETF (NVDL) fell nearly 34% overnight. The Direxion Daily NVDA Bull 2x Shares ETF (NVDU) and T-Rex 2X Long Nvidia Daily Target ETF (NVDX) plunged 33.8% and 33.77% respectively. All three funds reported their largest loss in a single day, according to data from FactSet.
Conversely, funds betting against Nvidia like the GraniteShares 2x Short NVDA Daily ETF (NVDL) rose more than 33%.
This sell-off has been a difficult lesson for investors who have seen Nvidia as invincible and have taken aggressive bets on its growth without understanding the risks of single stock ETFs.
The funds were designed to deliver twice the performance of Nvidia on a single-day basis.
It could be a matter of time before some of them implode depending on the intensity of market movements of individual stocks.
Single stock ETFs come with a huge risk and huge upside – we just witnessed the downside.
It’s so volatile – a day after the fall Nvidia regained some 9% of its one-day loss. Remarkable loss, exceptional recovery too?
Nvidia one-month chart 28th January 2025
Trade carefully.