(Bloomberg) — There's a new stock that reigns supreme in a speculative part of the ETF investment landscape.

Thanks to the relentless boom in artificial intelligence, Nvidia Corp. now holds a commanding position in exchange-traded funds that track a single company — representing more than half of all assets in so-called single-stock ETFs, over $6 billion in total. Meanwhile, funds centered on Tesla Inc represent just one-fifth of all holdings in the sector, down from two-thirds last year, according to data from JPMorgan Chase & Co. and Bloomberg Intelligence.

Even as a manufacturer of electric cars enjoys a return of shares, its stature among day traders has diminished. These days, they are increasingly lured by the wealth on offer trading the world's most prominent chip designer through leveraged ETFs.

Still, Nvidia-focused ETFs have taken in $4.4 billion so far this year, roughly six times what they earned in all of 2023, according to BI data. Meanwhile, flows into funds tracking Tesla alone totaled just over $1 billion this year, compared to $2.8 billion last year.

“NVDA funds have become more popular given investors' focus on the AI ​​theme and strong stock performance,” a JPMorgan research team including Bram Kaplan wrote in a recent note.

Single-stock ETFs that provide cumulative or inverse returns to their underlying companies, started two years ago. There are currently about 60 such funds listed in the US, with about $13 billion in total assets. In addition to Tesla and Nvidia, there are companies tracking funding including Apple Inc., Amazon.com Inc. and Microsoft Corp.

When regulators allowed these types of funds to be launched in 2022, they said they posed a “particular risk”, while concerns swirled about how retail traders might use them. In fact, they've become so popular that one issuer is even looking to introduce a 2x MicroStrategy Inc. ETF. which, if launched, would become the most volatile fund to debut in the US, according to Bloomberg Intelligence.

“As an industry, we must continue to be concerned that retail investors still do not fully understand how single-stock ETFs are designed to be used, namely for intraday use and not as part of a long-term investment strategy ,” said Amrita Nandakumar. , president of Vident Asset Management.

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Last year, Tesla-related funds held most of the single-stock ETF's assets and also accounted for most of the group's daily trading volumes. Its famous volatility likely attracted many traders – it gained 102% in 2023, after a 65% decline the year before.

But this year has been all about Nvidia and the AI ​​craze it sparked and continues to fuel. One of the standout single-stock ETFs among firm-focused groups has been the GraniteShares 2x Long NVDA Daily ETF (ticker NVDL), which gives investors twice the daily return of the underlying stock. Amid the fund's 400% year-to-date growth, its assets have grown to nearly $5 billion from about $210 million at the start of the year. It can now consistently be found among the most traded ETFs on a daily basis.

“If you love Nvidia, you'll love 2x Nvidia even more,” GraniteShares founder and CEO Will Rhind. said on Bloomberg TV IQ ETF recently. “You have to go where the enthusiasm is,” he said, adding “the whole conversation is dominated by Nvidia, and that's why I think Nvidia is the most important stock in the world right now. So it goes without saying that we will we have an ecosystem around Nvidia.”