Nvidia ETFs Plummet as New AI Rival Emerges: A Market Shockwave

Exchange-traded funds heavily invested in Nvidia took a significant hit following news of a Chinese AI model surpassing U.S. competitors in downloads. Leveraged ETFs with exposure to Nvidia experienced steep declines. The market response highlights the volatile nature of AI investments and the competitive global landscape.

Exchange-traded funds (ETFs) heavily invested in Nvidia suffered a sharp decline in early trading hours on Monday, sparked by the release of a new artificial intelligence model from a Chinese startup. Technology insiders are calling this development a "Sputnik moment" for U.S. AI companies, with downloads of the year-old DeepSeek model already surpassing those of American rival ChatGPT on Apple's app store.

Nvidia's shares dropped nearly 17% by midday, while ETFs offering leveraged exposure to the chipmaker fell even further. The GraniteShares 2x Long NVDA Daily ETF plunged 32.5%, whereas its leveraged inverse counterpart rose 31% due to double gains on Nvidia's losses. Other ETFs with significant Nvidia exposure, like ProShares Ultra Semiconductors, which holds more than 40% of its assets in the chipmaker, also saw substantial declines.

The volatile trading underscores the risks retail traders and speculators face when investing in leveraged ETFs, which carry higher fees. As new developments unfold in the AI sector, market dynamics are likely to keep investors on their toes.

(With inputs from agencies.)