Nvidia Corp. (NVDA) has emerged as the dominant force in the realm of single-stock exchange-traded funds (ETFs), eclipsing Tesla Inc. (TSLA) with a staggering 400% rally fueled by the relentless growth in artificial intelligence. 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 sector’s total assets.
Just a year ago, Tesla-centric funds held two-thirds of the sector’s assets, but they now account for only a fifth, underscoring a significant shift in investor sentiment. Despite Tesla’s recent stock rebound, day traders are increasingly drawn to Nvidia, viewing it as a more lucrative opportunity within the intensified ETF landscape.
In 2024 alone, Nvidia-focused ETFs have attracted $4.4 billion in investments, marking a substantial increase from the $700 million garnered in 2023. In contrast, funds dedicated solely to Tesla have seen inflows of just over $1 billion this year, down from $2.8 billion the previous year.
Commenting on the trend, analysts from JPMorgan highlighted, “NVDA funds have gained popularity due to investor focus on the AI theme and the stock’s exceptional performance.”
Single-stock ETFs, designed to amplify returns based on their underlying companies, have proliferated since their introduction two years ago. Currently, approximately 60 such funds are listed in the US, collectively managing around $13 billion in assets. Alongside Nvidia and Tesla, ETFs tracking other tech giants like Apple Inc. (AAPL), Amazon.com Inc. (AMZN), and Microsoft Corp. (MSFT) also populate this growing segment.
The surge in popularity of single-stock ETFs has not gone unnoticed by regulators, who expressed concerns about their potential risks when first allowing them in 2022. Reflecting on this, Amrita Nandakumar, president of Vident Asset Management, cautioned, “Retail investors may not fully grasp the intended use of single-stock ETFs, primarily for intraday trading rather than as part of a long-term investment strategy.”
Last year, Tesla-dominated funds dominated both assets and trading volumes within the single-stock ETF space, owing to the electric car maker’s renowned volatility and a notable 102% gain in 2023 following a sharp 65% decline the previous year. However, 2024 has witnessed Nvidia’s ascent, driven by fervent interest in AI technologies.
Among the standout performers in this category is the GraniteShares 2x Long NVDA Daily ETF (ticker NVDL), which offers investors double the daily return of Nvidia’s shares. With assets ballooning from $210 million at the beginning of the year to nearly $5 billion amid a 400% year-to-date surge, NVDL consistently ranks among the most actively traded ETFs.
Will Rhind, founder and CEO of GraniteShares, underscored the enthusiasm surrounding Nvidia, stating, “If you love Nvidia, you’re going to love 2x Nvidia even more,” emphasizing the growing ecosystem around the company.
In conclusion, Nvidia’s remarkable rise within single-stock ETFs underscores its pivotal role in the current investment landscape, driven by the explosive growth in artificial intelligence and sustained investor enthusiasm.
