Leveraged AI ETFs face $260B test as Nvidia earnings loom

The AI-driven boom in leveraged ETFs tied to individual stocks is set to face a critical test with Nvidia’s Wednesday earnings report, as investors have poured billions into speculative products designed to amplify their AI-themed bets. This surge reflects unprecedented retail investor appetite for AI exposure, with 112 new leveraged ETFs launching in 2025 compared to just 38 in all of 2024, creating what analysts warn is an increasingly crowded and volatile market.

The big picture: AI companies now dominate the leveraged ETF landscape, with more than half of all 190 single-stock leveraged and inverse ETFs in the U.S. connected to the AI theme.

• These AI-focused ETFs account for $17.7 billion of the total $23.7 billion invested in the leveraged and inverse ETF universe.
• Companies like Nvidia, Tesla, Palantir, and energy firms powering AI data centers have become the primary targets for these speculative products.

What you should know: Leveraged ETFs use swaps or options to deliver amplified returns—typically 1.5x or 2x—of their underlying stock’s daily performance.

• The GraniteShares 2x Long NVDA Daily ETF, launched in December 2022, has accumulated $4.56 billion in assets, making it one of the largest in the category.
• There are now as many ETFs offering leveraged exposure to Nvidia alone as there are ETFs tied to the entire $52 trillion S&P 500 index.

In plain English: Think of leveraged ETFs as financial amplifiers—if Nvidia’s stock goes up 10%, a 2x leveraged ETF goes up roughly 20%, but if Nvidia drops 10%, the ETF falls about 20%. These products use financial contracts called swaps and options to create this magnified effect, essentially borrowing money to increase your bet on a stock’s daily movements.

Why earnings matter: Major price swings typically occur around earnings announcements, creating outsized volatility in leveraged products.

• Options traders are pricing in about a $260 billion swing in Nvidia’s market value following its Wednesday results.
• When MongoDB, an AI-driven database company, reported better-than-expected earnings on Tuesday and its shares jumped 23% after hours, the Tradr 2x Long MDB Daily ETF—launched just two weeks earlier—gained 46%.

The volatility risk: Critics warn that retail investors may not fully understand how these products amplify both gains and losses.

• In late January, when Nvidia shares plunged 17% on reports about Chinese AI lab DeepSeek’s competing language model, the GraniteShares 2x ETF fell nearly 34%.
• “If you factor in the risk surrounding AI right now after all of its gains, and add the risk of leverage on top of that, well, there’s more potential for losses,” said Dave Nadig, president and director of research at ETF.com.

What they’re saying: Industry executives defend the products while acknowledging the speculative nature of the market.

• “We’re providing what people want; if people want AI exposure, that’s where we’re going to focus resources,” said Will Rhind, founder of GraniteShares.
• Matt Markiewicz of Tradr ETFs noted the company is exploring new AI themes, including a 2x ETF tied to Constellation Energy launched in July: “There is such a thirst for companies benefiting from the AI buzz.”
• “The underlying stock is going to do what it’s going to do, our job is to make sure ETF does what it says it will do,” Markiewicz added.

Market dynamics: The explosive growth has created both opportunities and concerns for the industry.

• For issuers, leveraged ETFs are attractive because they command average fees of 0.96% compared to 0.54% for the broader ETF industry.
• However, analysts warn the market is becoming overcrowded, with Nadig predicting a likely “shakeout” ahead.
• Bryan Armour, ETF analyst at Morningstar, a financial research firm, emphasized that “there are more and more opportunities every day for investors to gamble on individual stocks that are part of this dominant AI theme.”