Nvidia Corp. has seen a significant rise in popularity, leading to a surge in assets for an ETF focused on the AI chipmaker. This ETF has become a favorite among retail investors, with trading volumes hitting new highs despite recent setbacks. The broader ETF industry has seen increased equity exposure as a key factor in differentiating between successful and unsuccessful funds, with only 96 out of 2,000 stock ETFs managing to outperform the S&P 500 without exposure to Nvidia.
Investors have been pouring cash into leveraged funds that offer double the daily return of Nvidia stock. For example, the GraniteShares 2x Long NVDA Daily ETF has seen substantial inflows, growing from $220 million to over $5 billion in assets. The high demand for this leveraged product has made it one of the top 15 most traded ETFs.
Having exposure to Nvidia has been a key driver for the best-performing ETFs, with the top decile having nearly 7% weighting in the chipmaker. This has made it challenging for funds without Nvidia shares to outperform the market. In fact, it has been difficult to beat the S&P 500 without Nvidia exposure, leading investors to seek niche or unconventional products like cryptocurrencies and uranium-focused funds.
Only a small number of ETFs have managed to outperform without any help from Nvidia, focusing on niche sectors such as digital assets, IPOs, cloud computing, and cybersecurity. For example, the Amplify AI Powered Equity ETF uses a quantitative model powered by IBM’s Watson Platform to select holdings, excluding Nvidia and other AI-related stocks. This has resulted in underperformance compared to indices like the S&P and Nasdaq, which have seen strong momentum from companies like Alphabet Inc. and Broadcom Inc.
Overall, Nvidia’s rise to prominence in the ETF industry serves as a warning about the chipmaker’s importance and influence on fund performance. As investors continue to flock to ETFs with exposure to Nvidia, it remains to be seen how funds without this key stock will navigate the competitive landscape in the future.
Article Source
https://finance.yahoo.com/news/nvidia-retail-craze-unleashes-big-151935378.html
