ETFs Linked to Nvidia Drop Sharply Amidst DeepSeek AI Model Debut

Key Points:

* Exchange-traded funds (ETFs) with significant Nvidia exposure plunged after the unveiling of a potent AI model from Chinese startup DeepSeek.
* DeepSeek's model has surpassed ChatGPT downloads on Apple's app store, prompting concern among U.S. AI companies.
* Leveraged ETFs with double the gain exposure to Nvidia (NVDA) saw substantial declines: GraniteShares 2x Long NVDA Daily ETF plummeted 32.5%.
* Broader ETFs, such as Vanguard Information Technology Index Fund, also experienced declines due to Nvidia's significant weighting.
* Industry experts emphasize the market volatility associated with single-stock ETFs and the role of retail traders in driving these fluctuations.

Impact on ETFs

* Nvidia's share price tumbled approximately 17% on Monday.
* GraniteShares 2x Long NVDA Daily ETF plunged 32.5%.
* ProShares Ultra Semiconductors ETF, with over 40% exposure to Nvidia, declined 24.43%.
* Vanguard Information Technology Index Fund fell 4.7%, with Nvidia comprising nearly 15% of its portfolio.
* VistaShares Artificial Intelligence Supercycle ETF lost 7%, despite limited Nvidia exposure (3%).

Market Dynamics

* Bryan Armour, ETF analyst at Morningstar, highlights the volatility and high fees associated with leveraged ETFs.
* Data from EPFR indicates significant outflows from leveraged technology ETFs last week, including $400 million in Nvidia-linked funds.
* Industry observers expect market adjustments in the wake of DeepSeek's emergence, as companies compete for dominance in the rapidly evolving AI landscape.
* VistaShares CEO Adam Patti acknowledges the innovation and competition within the early-stage AI industry.