Nvidia Breaks Out, but Leveraged ETF NVDL Lags Behind
- Nvidia hit a new all-time high on Tuesday.
- NVDL, which aims to provide 2x the daily return of Nvidia stock, has underperformed.
Shares of Nvidia Corp. (NVDA) hit a new record high this week, finally breaking out after more than a year of choppy trading. But the largest leveraged ETF tied to the stock, the GraniteShares 2x Long NVDA Daily ETF (NVDL), is still trading below where it was a year ago, offering a cautionary tale for investors in leveraged products.
On Tuesday, Nvidia closed above $170 after announcing that the U.S. government would allow it to resume shipments of its H20 AI chips to China, unlocking billions of dollars in potential sales.
That closing price was nearly 26% above where the stock sat on June 18, 2024, when it last peaked before entering a volatile, sideways stretch marked by both AI hype and fears around competition and demand.
Despite a few attempts to break out—hitting $150 on multiple occasions—Nvidia never meaningfully surpassed its June 2024 high until now. But with this latest rally, the breakout appears to be real.
Not so for NVDL.
NVDL Lags NVDA Breakout
The leveraged ETF, which aims to provide 2x the daily return of Nvidia stock, topped out above $85 in June 2024. On Tuesday, it closed at $81, still about 4% below its prior peak, even as Nvidia trades 26% above its own.
That underperformance highlights one of the persistent issues with leveraged ETFs: daily rebalancing decay. These products reset their exposure every day, which can lead to compounding losses (or gains) that diverge meaningfully from the underlying stock, especially during periods of volatility. Even if you get the direction of the trade right, timing and path matter a lot.
The divergence has been reflected in investor behavior. NVDL currently holds $4.4 billion in assets under management, down sharply from its peak of $6.7 billion in November 2024. So far this year, investors have pulled $2.2 billion from the fund—possibly a sign of disappointment—even as Nvidia has soared.
For those tempted by the double-upside promise of leveraged ETFs, this episode offers a stark reminder that getting the stock right isn't always enough.
