Jan 28 (Reuters) - Short-term traders are proving eager to bet on a rapid recovery in Nvidia, pouring money into the three largest leveraged exchange-traded funds which are linked to gains in the share price of the AI chipmaking giant.
Speculators and traders flocked to buy leveraged funds which aim to deliver double the daily return in Nvidia, asset managers said on Tuesday. The company's stock suffered the biggest one-day fall in market capitalization in history on Monday in response to news that China's DeepSeek launched a new artificial intelligence model.
"We had about $1 billion of inflows into our long product," said Will Rhind, founder and CEO of GraniteShares, referring to the largest of these funds, the GraniteShares 2x Long NVDA Daily ETF (NVDL. That wasn't enough to offset the impact of Nvidia's massive selloff on its assets, which shrank to about $4.3 billion from a high north of $6 billion last year.
Each of the four Nvidia leveraged long ETFs ended Monday with losses of between 33% and 34%, according to LSEG data.
The T-Rex 2x Long Nvidia Daily Target ETF (NVDX) saw inflows of $7.6 million into the $488.4 million fund on Monday, according to Scott Acheychek, the chief operating officer of REX Financial, one of the two firms that created the fund. Its much smaller bearish ETF, which delivers a gain equivalent to any loss in Nvidia's stock price, saw $3.1 million in outflows, the firm said.
The Direxion Daily NVDA Bull 2x Shares ETF (NVDU), which has about $435 million in assets, had $61.4 million in inflows, the firm said. Its corresponding inverse fund also had inflows, of about $3 million.
The smallest of the four leveraged Nvidia ETFs, the $3 million Leverage Shares 2x Long NVDA Daily ETF (NVDG), couldn't immediately provide details of flows into its fund on Monday in dollar terms. But Paul Marino, chief revenue officer of Themes ETFs, which oversees the U.S. business of Leverage Shares, said trading volume was six times average.
"That shows you how many speculative traders are involved in Nvidia," Marino said. By the end of the day on Monday, he said flows had turned positive and remained so throughout the day on Tuesday.
White House artificial intelligence and crypto czar David Sacks was asked on Fox News if there was intellectual property theft involved in the rise of DeepSeek.
"Well, it's possible. There's a technique in AI called distillation, which you're going to hear a lot about, and it's when one model learns from another model," Sacks said in the interview.