Bullish Nvidia Trade Soars as Day Traders Bet on Leveraged ETFs

(Bloomberg) — The latest Nvidia Corp. frenzy is fueling an unprecedented rally in the booming industry of leveraged-up ETFs as retail traders go all-in on the world’s “most important stock.”

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A GraniteShares fund, which gives investors two times the daily return of the Jensen Huang-run company, is now up 450% over the past year, with a record $4.7 billion in trading volume last week. The $2.8 billion GraniteShares 2x Long NVDA Daily ETF (ticker NVDL) launched in December 2022.

Nvidia, the posterchild of the artificial intelligence craze, is fueling the bull market to multiple records with the now $2.8 trillion chipmaker posting a fresh blockbuster earnings report as bullish call options boom. On the flipside, bears have got crushed with the GraniteShares 2x Short NVDA Daily ETF (NVD), which tracks the daily inverse return of the underlying stock, down 86% this year alone.

Read more: Nvidia Stock Surge Fueled by Short-Dated Call Option Squeeze

With speculative euphoria running wild in markets, the creator behind the amped-up products is prepping an avalanche of new options-fueled strategies tracking everything from gold and Big Tech to Bitcoin.

Put another way, Nvidia is increasingly the new Tesla Inc. as tech-bullish retail traders pounce on new ETF strategies.

“If we were having this conversation three years ago, I would say we’d be talking exclusively about Tesla. That was where the enthusiasm was. That’s where all the flows were,” Will Rhind, chief executive officer of GraniteShares, said on Bloomberg Television’s ETF IQ. “Now, obviously the whole conversation is dominated by Nvidia that is why I think Nvidia is the most important stock in the world right now. And it goes without saying we got an ecosystem around Nvidia.”

Leveraged funds have gained favor this year, amassing $11 billion of inflows so far, on track to keep pace with last year’s $20 billion, according to data compiled by Bloomberg Intelligence. Demand for this breed of funds has increased as investors seek new vehicles to bet on the market’s biggest themes. But they have also garnered mixed reviews due in part for exposing retail traders — who are often dubbed as less sophisticated than institutional ones — to high risk.

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GraniteShares has filed for at least 25 ETFs that track the performance of other single-stock ETFs that have daily 2x and 3x leveraged strategies.

“What we are providing is institutionally priced leverage to the masses — that’s the big breakthrough,” he added. “With leverage comes risk and these products are not without risk.”

–With assistance from Denitsa Tsekova.

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