AI frenzy sweeps the fund market! NVIDIA beats Tesla to become the most favored asset in single-stock ETFs

According to the VESYNC Financial APP, in the speculative field of ETF investment, a new player has taken the lead.

Benefiting from the continuous prosperity of artificial intelligence, NVIDIA (NVDA.US) now dominates the ETF tracking a company, accounting for more than half of the assets of the so-called single-stock ETF, totaling over $6 billion. Meanwhile, according to data from JP Morgan and Bloomberg Intelligence, funds centered around Tesla (TSLA.US) only account for one-fifth of the industry's total assets, down from two-thirds last year.

Despite the rebound in the stock price of this electric vehicle manufacturer, its position among short-term traders has declined. They are increasingly attracted by the wealth provided through leveraged ETF trading by this globally outstanding chip design company.

According to Bloomberg Intelligence, overall, ETFs focused on NVIDIA have received $4.4 billion in inflows so far this year, about six times the full year of 2023. Meanwhile, funds flowing into Tesla this year are slightly over $1 billion, compared to $2.8 billion last year.

The JP Morgan research team, including Bram Kaplan, wrote in a recent report: "Given investors' focus on the artificial intelligence theme and the strong performance of the stock, funds tracking NVIDIA have become more popular."

It is understood that single-stock ETFs were launched two years ago to provide lucrative or inverse returns for their underlying companies. Currently, there are about 60 such funds listed in the United States, with total assets of around $13 billion. In addition to Tesla and NVIDIA, there are also funds tracking companies such as Apple (AAPL.US), Amazon (AMZN.US), and Microsoft (MSFT.US).

When regulators allowed these funds to be launched in 2022, they stated that this brought "special risks" as people were concerned about how retail traders might use them. In fact, they have become so popular that an issuer even hopes to launch a 2x MicroStrategy (MSTR.US) ETF, which if launched, would become the most volatile fund listed in the United States.

Amrita Nandakumar, President of Vident Asset Management, said: "As an industry, we should continue to be concerned that retail investors still do not fully understand the intended use of single-stock ETFs, which is for day trading rather than as part of a long-term investment strategy.

Last year, funds related to Tesla held a large portion of single-stock ETF assets and also accounted for a significant portion of daily trading volume in this category. The famous volatility may have attracted many traders - after falling 65% in the previous year, such funds rose by 102% in 2023.

But this year is all about NVIDIA and the artificial intelligence boom it has sparked and continues to drive. The GraniteShares 2x Long NVDA Daily ETF (NVDL.US) is an ETF focused on NVIDIA's single stock, providing investors with double the daily return of the underlying stock, and its performance this year has been outstanding. Year-to-date, the fund has risen by 400%, with its assets growing from around $210 million at the beginning of the year to nearly $5 billion. It now ranks among the top ETFs in terms of daily trading volume.

Will Rhind, the founder and CEO of GraniteShares, recently stated: "If you like NVIDIA, you'll love 2x NVIDIA. You have to go where the heat is. NVIDIA dominates the market hotspots, which is why I believe NVIDIA is currently the most important stock in the world. So needless to say, we will build an ecosystem around NVIDIA."