An exchange-traded fund (ETF) associated with the surging stock of the U.S. chip manufacturer Nvidia Corp has emerged as the best-performing ETF of the year, thanks to the growing enthusiasm surrounding artificial intelligence.
The GraniteShares 1.5X Long NVDA Daily ETF, which tracks 1.5 times the daily percentage change of Nvidia’s stock, has recorded a remarkable 328.5% gain year-to-date, outpacing the stock’s own rise of 190%.
According to VettaFi Research, this ETF holds the top position as the best-performing ETF in 2023, closely followed by the GraniteShares 1.5x Long Meta Daily ETF, another leveraged ETF, which has surged by 272% year-to-date.
Leveraged ETFs aim to magnify the returns of the underlying index or stock.
“The remarkable performance of the underlying company is the primary reason for NVDL’s status as the best-performing ETF in the U.S. market,” explained Will Rhind, CEO and founder of GraniteShares. “Nvidia has become the leading stock to hold in the field of artificial intelligence.”
As of Wednesday, the net assets in the ETF have increased to $205.6 million, compared to its initial launch with assets of just under half a million dollars in December 2022, as reported by LSEG Lipper data.
This year, there has been a notable surge of interest in single-stock ETFs, which offer investors greater exposure to individual company stocks. These ETFs have attracted particular attention from those interested in the “Magnificent 7,” a group that includes companies like Nvidia and Meta Platforms.
In September, Direxion introduced two new ETFs linked to Nvidia, while REX Shares and Tuttle Capital Management unveiled the T REX Single-Stock ETF suite last month. This suite provides investors with options for 200% and -200% exposure to Nvidia and Tesla.
Bryan Armour, the Director of Passive Strategies Research for North America at Morningstar, pointed out that leveraged ETFs are attractive to individuals seeking the intense volatility, much like how moths are drawn to flames. However, he emphasized that in the long term, they tend to result in losses. Leveraged ETFs reset their exposure daily, which means they have to purchase more when their target assets rise and sell when they decline.
Reported by Bansari Mayur Kamdar in Bengaluru; Edited by Mrigank Dhaniwala.