Investors Gamble Big on AI with Leveraged ETF Surge

Investor enthusiasm for artificial intelligence has led to a significant surge in leveraged and inverse exchange-traded funds (ETFs) centered around AI-focused stocks, particularly those tied to Nvidia , the leading chipmaker in the AI space. According to a Reuters analysis, 112 U.S.-listed leveraged and inverse ETFs were launched in 2025, compared to just 38 in the entire 2024 year. This reflects growing retail investor demand for products that amplify exposure to AI-driven companies like Nvidia and Tesla , as well as energy firms supporting AI data centers [1].

Leveraged and inverse ETFs, which typically use swaps or options to magnify returns, are now more than half of the 190 U.S.-listed single stock leveraged and inverse ETFs. These products collectively hold $23.7 billion in assets, with $17.7 billion focused on AI-related themes [1]. The GraniteShares 2x Long NVDA Daily ETF, for example, has amassed $4.56 billion in assets since its December 2022 launch [1]. This growing popularity underscores how pivotal investor perceptions of AI's future are shaping financial markets.

Nvidia, in particular, has drawn attention as a central figure in the AI investment narrative. According to analyst Bryan Armour of Morningstar , earnings reports from AI leaders like Nvidia are now pivotal events that can trigger significant market swings. Options traders are currently pricing in a potential $260 billion change in Nvidia’s market value after its upcoming earnings announcement [1]. The company’s performance has already demonstrated extreme volatility in leveraged ETFs, such as the GraniteShares 2x ETF, which fell nearly 34% following a 17% drop in Nvidia shares in late January [1].

The recent outperformance of AI-driven companies further illustrates the potential of these leveraged ETFs. On Tuesday, shares of MongoDB surged over 23% in after-hours trading after the firm reported strong AI-related client growth. This triggered a 46% gain in the Tradr 2x Long MDB Daily ETF, launched just two weeks prior [1]. Such movements highlight the volatility and speculative nature of these products, which can magnify gains but also expose investors to greater downside risk.

Critics and industry experts have raised concerns about the risks associated with leveraged ETFs, particularly their complexity and potential for losses. Dave Nadig, president of ETF.com, warned that the market for these products is becoming “overcrowded” and that a “shakeout” may occur [1]. These ETFs typically charge higher fees—averaging 0.96%—compared to the industry average of 0.54%. While some argue that these products fulfill a clear demand for AI exposure, others caution that retail investors may not fully understand how leveraged ETFs perform over time, especially during periods of high volatility or when holding positions beyond short-term horizons [1].

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