After briefly becoming the world's most valuable company last week, NVIDIA's astonishing rise is taking a breather.

Over the past three trading days, NVIDIA has accumulated a 13% decline, with its market value evaporating by approximately $400 billion.

This fluctuation has not only affected NVIDIA stockholders but also delivered a significant blow to retail investors who have invested in leveraged ETFs.

Last week, the ETF that doubles down on NVIDIA, GraniteShares 2x Long NVDA Daily ETF (NVDL), attracted a record $743 million in inflows, drawing a substantial number of investors hoping to amplify the gains of NVIDIA's stock.

However, the timing was quite unfortunate, as since last Tuesday's close, the ETF has plummeted by about 25%.

Nevertheless, NVDL has maintained an impressive gain of 347% year-to-date.

Dave Lutz, head of ETFs at JonesTrading, warned:

Investing heavily in NVIDIA leveraged ETFs is a high-risk, high-reward move... Retail investors need to fully understand the structure of these products to grasp the risks involved comprehensively.

These high-leverage ETFs use derivatives to amplify gains or inverse performance, thus potentially offering substantial returns but also harboring significant risk of loss.

Advertisement

Since its launch in December 2022, NVDL has attracted about $3.7 billion in assets.In 2024 alone, there has been an inflow of approximately $1.8 billion, compared to just $189 million for the entire year of 2023.

As the core target of the artificial intelligence craze and the "most important stock on Earth," Nvidia has risen by about 140% this year.

Nvidia short sellers have been hit hard this year. The GraniteShares 2x Short NVDA Daily ETF (NVD), which tracks the daily inverse returns of Nvidia's stock, has fallen nearly 90% this year.

Although Nvidia is currently in a temporary adjustment, some market analysts still have a positive outlook for the stock.

Jane Edmondson, head of TMX VettaFi's thematic strategy, said to the media:

Nvidia and its AI peers do indeed need an adjustment after a significant increase.

Investors may take profits at the end of the quarter and rebalance their portfolios. However, the fundamentals that support these companies still exist.