Almost all of the S&P 500 index’s gains in 2023 come from a few mega-cap tech shares nicknamed the ‘Magnificent Seven’. And leading the way is Nvidia Corp (NASDAQ: NVDA) stock.
The stock skyrockets
At its 52-week low on 28 December 2022, Nvidia’s share price slumped to $138.84, but has since soared. As I write, it stands at $485.78, valuing the US chip designer at $1.2trn.
Here’s how it has performed over five timescales:
| One month | +11.3% |
| Six months | +59.1% |
| 2023 to date | +232.2% |
| One year | +198.6% |
| Five years | +1,087.9% |
My table shows this tech share’s powerful momentum over periods ranging from one month to five years. Furthermore, its price has been even higher, hitting a record of $505.48 on 20 November.
Incredibly, $1,000 invested in Nvidia half a decade ago would now be worth a whopping $11,879. This return is beaten by only a few large-cap stocks elsewhere.
How I wish I’d bought it
Last November, my wife and I bought shares in the top-four US tech companies. However, having not researched Nvidia in depth at that time, I skipped a fantastic opportunity to buy some shares at under $140. How I’m kicking myself today for not hitting the ‘Buy’ button a year ago.
Nvidia doubled?
Perhaps there’s a way I can still benefit from this chip designer’s growth as it helps to usher in the new age of generative artificial intelligence (GAI)? For example, what if I could buy a share that doubles the capital returns from this popular stock?
Since October, I’ve been able to do just this, thanks to the launch of two new US exchange-traded funds (ETFs). These two turbo-charged, leveraged stocks have been launched by US firms REX Shares and Tuttle Capital Management. The specialist ETFs use financial instruments to double the underlying shares’ daily returns. I’ll elaborate further.
How these ETFs work
These two new funds/stocks are T-REX 2X Long NVIDIA Daily Target ETF (CBOE: NVDX), and the T-REX 2X Inverse NVIDIA Daily Target ETF (CBOE: NVDQ).
For example, let’s say I buy the long ETF and Nvidia rises by 5% that day. Then my gain would be 10% (or slightly less, due to issues such as spreads and dealing fees). However, if I’d bought the short ETF on that day (betting on Nvidia stock falling), then I’d lose 10%.
I repeat, these products are designed to double the daily return of Nvidia shares — either up (long) or down (short). But thanks to ongoing charges and other technical factors, they’ll never exactly double Nvidia’s gains/losses in the long term.
For risk enthusiasts only?
While Nvidia’s stock itself can be pretty volatile, these two shares are even more risky by design.
For instance, on Halloween (31 October), the NVDX ETF closed at $23.13. It then soared to $35.05 on Monday, 20 November. That’s a juicy gain of 51.5% in under three weeks.
Conversely, over the same 20-day period, the inverse ETF (NVDQ) collapsed in value from $31.65 to $20.44. That’s a steep plunge of 35.4%. These returns clearly show how very, very volatile both stocks are.
Would I buy? No! I suspect these new products are aimed at day traders and speculators who enjoy the thrills of owning high-volatility stocks. But that’s not me.
