Despite the stock’s decline, traders have invested $5 billion in leveraged Nvidia ETFs, resulting in a 425% increase.

If you’ve been keeping an eye on the stock market this year, you may have noticed the impressive performance of leveraged ETFs that track the performance of Nvidia. These ETFs have seen incredible growth, attracting $5 billion from investors and outperforming other single-stock ETFs that track mega-cap tech names.

Leveraged single-stock ETFs are a new type of exchange-traded fund that focus on a single name and add directional leverage to them, potentially juicing returns in a big way. For example, the T-REX 2X Long NVIDIA Daily Target ETF is up an astounding 425% year-to-date, despite Nvidia’s recent 16% correction.

These funds are typically meant for short-term day trading given the amount of leverage they take on. However, retail investors are also getting in on the action, with the r/LETFs forum on Reddit boasting 27,000 members discussing the potential of these ETFs for long-term holds.

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The success of Nvidia-focused leveraged ETFs has catapulted them into the big leagues, amassing $5 billion in assets under management. In comparison, other single-stock leveraged ETFs targeting popular mega-cap technology stocks like Apple, Alphabet, Amazon, Meta Platforms, and Microsoft have attracted significantly less assets.

But it’s not all upside for leveraged ETFs. While Nvidia-focused funds highlight the potential for gains, bullish Tesla-focused funds have shown the downside. For instance, the Direxion Daily TSLA Bull 2X Shares ETF is down 70% since its record high in August 2022, reflecting Tesla’s 37% decrease over the same timeframe.

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