ARTIFICIAL intelligence (AI) bulls are increasingly gravitating towards an exchange-traded fund (ETF) that amps up bets on Nvidia as trading volumes and inflows hit all-time highs.

After notching a record US$252 million in fresh capital last week, the GraniteShares 2x Long NVDA Daily ETF saw its second-biggest trading volume on Monday (Mar 11) as Wall Street’s AI darling extended its Friday retreat.

The fund, which gives investors two times the daily return of the underlying stock, has grown to US$1.4 billion since launching at the end of 2022. NVDA has become a vehicle for investors big and small who are steadfast in their conviction that the Jensen Huang-led firm is riding profound technological shifts in the global economy that will create new wealth-generating opportunities in the stock market.

On Friday when Nvidia dropped nearly 6 per cent, the fund clocked in record trading volumes, with over US$2 billion worth of NVDL exchanging hands. Investors piled a net US$102 million into the fund that day, likely betting on a short-term reversal in the semiconductor stock.

To Dave Lutz, head of ETFs at JonesTrading, “activity in NVDL is a key indicator of retail sentiment and activity”, given the size of the ETF’s trading volume. Meanwhile, short interest as a percentage of shares outstanding in the fund is low at just 1.5 per cent, according to Markit Securities.

The staying power of Nvidia’s rally will be tested on Tuesday, when a key inflation reading drops.

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Year-to-date NVDL’s returns stand at 156 per cent. It is the second-best performing ETF in the US in 2024. The best performing fund – the US$269 million T-Rex 2X Long NVIDIA Daily Target ETF – is up roughly 179 per cent. NVDL traded as a 1.5x fund until mid-January, which accounts for its trailing performance.

Even after Nvidia’s two-day drop, the stock is still up more than 70 per cent so far this year. BLOOMBERG