Investors directed significant inflows into the 2x leveraged Nvidia ETF, ticker NVDL, on May 26 [1].
This surge in demand highlights a growing appetite for high-risk instruments among traders seeking to amplify gains from Nvidia's recent performance and a broader rally in tech stocks [2]. However, these instruments carry substantial risks, including volatility decay that can erode value even if the underlying asset remains stable.
The NVDL fund seeks to provide two times the daily return of its underlying holding. While the strategy can lead to outsized gains, it also accelerates losses during market downturns. Historical data shows the fund experienced a severe drawdown in early 2025, losing 67% from its peak to trough [3]. During that same period, the underlying Nvidia stock fell roughly 35% [3].
Despite these sharp declines, some long-term metrics suggest strong historical growth. Reports indicate NVDL outperformed the broader market over the past five years, delivering an annualized return of 67.32% [4]. The fund also recorded an average annual return of 79.05% over that same five-year window [4].
The recent influx of capital suggests that current market sentiment is prioritizing short-term momentum over the risks associated with daily resets. Traders are increasingly using these leveraged products to capture the volatility of the artificial intelligence sector, a trend that persists despite the fund's history of deep corrections.
“NVDL lost 67% from its peak to trough during the early-2025 drawdown”
The increased demand for NVDL indicates a high-risk tolerance among retail and institutional traders who are prioritizing momentum over capital preservation. Because leveraged ETFs reset daily, they are designed for short-term trading rather than long-term investing; the divergence between Nvidia's 35% drop and NVDL's 67% drop in early 2025 illustrates how 'volatility decay' can amplify losses beyond a simple 2x ratio.
