Buying on dips has always been a winning strategy during the recent period of significant growth in tech stocks driven by AI. Now, this approach has backfired, especially for investors who use larger bets to magnify returns.

A batch of leveraged ETFs centered around technology products suffered double-digit losses, as stocks related to artificial intelligence frenzy took a hit from the recent market crash. These ETFs aim to double or triple the daily volatility of the underlying securities.$NASDAQ 100 Index (.NDX.US)$Wednesday's drop of 3.7% was the biggest single-day decline since October 2022 and continues the downward trend that began last week.

providing triple the daily volatility of the New York Semiconductor Index.$Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL.US)$Wednesday's sharp drop of 15% continues the 37% decline of the past 14 days alone. Just last week, the fund absorbed a record $1.5 billion in funds, while its market cap of $23 billion.$ProShares UltraPro QQQ ETF (TQQQ.US)$and $3x long S&P 500 ETF - ProShares (UPRO.US) worth $4 billion and $3x long Nasdaq ETF - ProShares (TQQQ.US) worth $4 billion dropped nearly 7% and 11%, respectively, while the cumulative inflows of the three ETFs last week were about $0.65 billion. The combined inflow of funds for the three ETFs exceeded $2 billion.$ProShares UltraPro S&P500 ETF (UPRO.US)$The $3x long S&P 500 ETF - ProShares (UPRO.US) worth $4 billion and $3x long Nasdaq ETF - ProShares (TQQQ.US) worth $4 billion dropped nearly 7% and 11%, respectively, while the cumulative inflows of the three ETFs last week were about $0.65 billion. The combined inflow of funds for the three ETFs exceeded $2 billion.

Before the sharp drop in tech stocks on Wednesday, disappointing performances raised doubts about when investments in AI would pay off, accelerating the shift from winners in tech stocks to those with smaller market capitalizations.$Alphabet-A (GOOGL.US)$And.$Tesla (TSLA.US)$Before the sharp drop in tech stocks on Wednesday, disappointing performances raised doubts about when investments in AI would pay off, accelerating the shift from winners in tech stocks to those with smaller market capitalizations.

Jane Edmondson, head of thematic strategy at TMX VettaFi, said: "Most investors are using these leverage products to double their investment ideas." "This approach amplifies gains when fundamentals rise, but also causes greater pain when fundamentals fall.

These seemingly untimely trades highlighted the increased risk of investing in high-intensity ETFs. ETFs use derivatives to enhance returns. Reverse and leveraged ETFs are popular among day traders because they are designed for short-term holding. But their structure means that they can bring both huge losses and huge gains.

So far, leveraged long and short single-stock funds have accumulated about $9 billion inflows in 2024, with hopes of exceeding last year's $10.2 billion. Since the beginning of the year, all four funds have continued the significant growth, with gains exceeding 30%, while the GN100 ETF has surged over 280%, making it one of the most actively traded ETFs with daily trading volume exceeding $1 billion.$GraniteShares 2x Long NVDA Daily ETF (NVDL.US)$Since the beginning of the year, all four funds have continued the significant growth, with gains exceeding 30%, while the GN100 ETF has surged over 280%, making it one of the most actively traded ETFs with daily trading volume exceeding $1 billion.

Mohit Bajaj, director of ETFs at WallachBeth Capital, said: "Obviously, these ETFs will also fall when their underlying assets fall significantly." "But they have performed well this year and are still performing well so far this year."

Edited by Jeffrey