Nvidia’s recent stock market volatility underscores its pivotal role in the $9.2 trillion US ETF industry.
The AI chipmaker’s rapid ascent has led to a dramatic increase in assets for ETFs with significant Nvidia holdings, making these funds popular among retail investors despite recent market swings.
Within the ETF industry, Nvidia (NASDAQ:NVDA) exposure has become a key factor in distinguishing top performers from laggards. Since Nvidia emerged as an AI leader last year, only 96 out of 2,000 equity ETFs with little to no Nvidia holdings have outperformed the S&P 500, according to Bloomberg Intelligence. This underscores Nvidia’s influence in the ETF market.
Despite concerns about Nvidia’s future after a $400 billion drop in market value, leveraged ETFs focused on Nvidia have seen substantial inflows. The GraniteShares 2x Long NVDA Daily ETF (NVDL) attracted around $2.7 billion, while the T-Rex 2X Long NVIDIA Daily Target ETF (NVDX) drew over $300 million this year. NVDL’s assets surged from $220 million at the year’s start to over $5 billion, with trading volumes exceeding $10 billion in recent sessions.
As Nvidia’s Stock Soars, ETFs with High Exposure See Significant Gains
ETFs without Nvidia (NASDAQ:NVDA) exposure have struggled to keep up. The top-performing ETFs typically have nearly 7% of their assets in Nvidia, while the lowest performers have minimal exposure. Bloomberg Intelligence’s Athanasios Psarofagis noted that the chipmaker has been a major driver for leading ETFs over the past 18 months.
Investors looking to outperform the S&P 500 without Nvidia exposure have turned to niche products like uranium, cryptocurrency, and investments in Poland and Argentina. Only 96 ETFs out of over 2,000 have outperformed the broader market with little or no NVDA exposure, including the VanEck Digital Transformation ETF (DAPP) and the Bitwise Crypto Industry Innovators ETF (BITQ).
One notable example is the $104 million Amplify AI Powered Equity ETF (AIEQ), which uses IBM’s Watson Platform to select stocks. Despite holding other tech giants like Microsoft and Qualcomm, AIEQ has gained just 1.6% year to date, lacking Nvidia’s momentum.
Jessica Rabe, co-founder of DataTrek Research, pointed out the irony of AIEQ’s AI algorithm overlooking Nvidia and other AI-related stocks like Alphabet and Broadcom, contributing to its underperformance compared to the S&P and Nasdaq.
Featured Image – Megapixl
