Nvidia Soars Past Tesla, Claims Single-Stock ETF Crown

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In the dynamic landscape of ETF investments, Nvidia Corp. (NVDA) has emerged as a dominant force within single-stock ETFs, driven by the relentless growth of artificial intelligence (AI). According to data from JPMorgan Chase & Co. and Bloomberg Intelligence, Nvidia now commands over $6 billion in assets across single-stock ETFs, representing more than half of the total assets in this sector. This surge has overshadowed Tesla Inc. (TSLA), whose centrality in single-stock ETFs has dwindled from two-thirds of holdings last year to just a fifth currently.

Investors, particularly day traders, are increasingly drawn to Nvidia’s prowess in chip design and its pivotal role in the AI revolution. So far this year, Nvidia-focused ETFs have attracted approximately $4.4 billion in inflows, a significant increase compared to $700 million in 2023. In contrast, ETFs focused solely on Tesla have seen inflows of just over $1 billion, down from $2.8 billion last year.

“NVDA funds have surged in popularity due to investor enthusiasm for the AI theme and Nvidia’s exceptional performance,” noted a recent JPMorgan research report authored by Bram Kaplan.

Single-stock ETFs, known for offering amplified returns based on their underlying companies, were introduced two years ago and now encompass around 60 funds with a collective $13 billion in assets. Alongside Nvidia and Tesla, ETFs also track other tech giants like Apple Inc. (AAPL), Amazon.com Inc. (AMZN), and Microsoft Corp (MSFT).

The popularity of these funds has raised concerns among regulators about potential risks, especially regarding how retail traders might utilize them. The prospect of a 2x MicroStrategy Inc. ETF underscores this volatility, potentially becoming the most volatile fund in the US upon launch.

Amrita Nandakumar, president of Vident Asset Management, emphasized ongoing concerns about retail investors’ understanding of these ETFs, cautioning that they are designed for intraday trading rather than long-term investment strategies.

While Tesla dominated single-stock ETF assets and trading volumes last year, 2024 has seen Nvidia seize the spotlight with its AI-driven growth trajectory. Notably, the GraniteShares 2x Long NVDA Daily ETF (ticker NVDL) has stood out, offering investors twice the daily return of Nvidia shares. Amid its staggering 400% year-to-date rally, the fund’s assets have surged from $210 million at the beginning of the year to nearly $5 billion, consistently ranking among the most actively traded ETFs.

Will Rhind, founder and CEO of GraniteShares, highlighted the fervor surrounding Nvidia, describing it as the most influential stock globally currently, fueling a burgeoning ecosystem around its technological advancements.

In summary, Nvidia’s ascendancy in the single-stock ETF realm underscores its pivotal role in the AI revolution and the evolving landscape of high-growth investment strategies.