/shutterstock_2309655121.jpg)
The gravity-defying rally in artificial intelligence (AI) stocks can also be described as the “Nvidia rally,” as no company has spearheaded the market-defining trend more than the Santa Clara-based chip specialist. Founded in 1993, Nvidia (NVDA) is a leader in specialized AI semiconductors, and also supplies software. The company designs and sells graphics processing units (GPUs) for the gaming and professional markets, and system-on-a-chip (SoC) units for the mobile computing market.
Trading under a dollar as recently as 2016, the stock closed Monday at $128 - and that's after NVDA's recent 10-for-1 stock split. While the stock is up an impressive 159% on a YTD basis, NVDA is up a staggering 2,834% over the past five years, and last month it briefly took over the No. 1 spot as the most valuable company in the world. With Apple (AAPL) back in the top spot, Nvidia's market cap now stands at a formidable $3.16 trillion.
Such enormous upside in a stock brings with it the usual set of doubters and skeptics who are calling for the bubble's imminent burst - while on the other hand, a virtual cottage industry of single-stock exchange-traded funds (ETFs) has sprouted up around Nvidia, for investors who simply can't get enough of the shares.
Unlike diversified ETFs, single-stock ETFs offer magnified returns (and risks) by using derivatives to track a single company's stock price. Often times, these ETFs look to amplify the stock's returns by adding leverage - either on the short or long side - or maximizing yield. Whatever the strategy, these funds are often best reserved to shorter holding periods, and for experienced investors with a higher risk tolerance.
Keeping this in mind, here are three ETFs dedicated to the Nvidia trade, for investors who just can't get enough of the AI poster child.
1. GraniteShares 2x Long NVDA Daily ETF
The GraniteShares 2x Long NVDA Daily ETF (NVDL) aims to deliver twice the daily percentage change of the Nvidia common stock price, before fees and expenses. NVDL uses leverage to achieve its 2x daily movement, which magnifies gains (and losses) compared to owning NVDA stock directly. NVDL's assets under management (AUM) currently stands at $5.2 billion, and its management fee is 1.15%.
With an average volume of 20.3 million shares, NVDL is highly liquid, and it yields 2.27% annually. Shares of the ETF are up 397.8% on a YTD basis, though the GraniteShares site notes that the fund should not be expected to deliver the expected 2x leverage over time frames greater than one day.
Overall, NVDL's higher volatility, due to leverage, is suitable for experienced investors with a higher risk tolerance and short-term holding period. And yes, for investors who can't get enough leverage, NVDL is also optionable.
2. YieldMax NVDA Option Income Strategy ETF
From the Elevate Shares - YieldMax ETFs fund family, the YieldMax NVDA Option Income Strategy ETF (NVDY) seeks to generate monthly income by employing an options selling strategy on NVDA. Specifically, the ETF aims to collect premiums by selling call options on NVDA, forgoing potential unlimited upside in NVDA in the process.
NVDY's AUM is currently at $904.7 million, and average volume is 1.95 million shares traded. Its management fee is 0.99%, and the fund doesn't use leverage.
The ETF is up just 26.8% on a YTD basis - better than the broader equities market, but grossly underperforming Nvidia's rise in the same period. This is not surprising, as the ETF essentially sells call premium against the upside potential in NVDA stock.
However, the ETF offers a healthy dividend yield of 60.29%, making it an attractive choice for passive income investors. Moreover, the ETF's distribution history has been impressive, with substantial increases over the past 12 months, starting with $0.74 back in June 2023 to now averaging about $2.50 per share for four of the past five months.
In other words, this NVDA ETF caters to investors with a more income-oriented strategy.
3. Direxion Daily Nvda Bull 2X Shares
We conclude our list of Nvdia-focused ETFs with the Direxion Daily NVDA Bull 2X Shares (NVDU). This ETF aims to deliver 2x the daily percentage change of NVDA's common stock price, before fees and expenses.
In simpler terms, NVDU aims to magnify NVDA's daily returns by a factor of two. With an AUM of $482.8 million, it charges a management fee of 0.5%. The ETF also offers a dividend yield of 0.77%.
The ETF is up 325.7% on a YTD basis, outperforming the rise in Nvidia stock over the same period. Like NVDL, the issuer cautions that returns will likely deviate from the targeted 2x over time frames of longer than a day.
And just like NVDL above, NVDU is also suitable for more experienced investors with a higher risk tolerance who are comfortable trading with leverage. Overall, this ETF is more suitable for short-term investors.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
