Demand for high-risk leveraged and inverse single-stock exchange-traded funds in the US may be losing some momentum after a rapid expansion in new products.
A volatile bull market has encouraged investors to seek products capable of magnifying daily moves in some of the market’s most popular and volatile stocks. The surge in speculative offerings has been substantial, with leveraged products accounting for as much as half of all new ETF launches in June alone.
However, analysts are increasingly questioning whether the pace of expansion can continue as competition intensifies and assets become concentrated among a relatively small number of successful funds.
“The market for these is saturated and there’s only so much money out there chasing this kind of product,” said Morningstar analyst Daniel Sotiroff. “A few firms at the top end up commanding the lion’s share of the money, and then there’s a long tail of also-rans who are struggling to attract assets.”
Smaller funds face pressure to reach viable scale
ETF industry analysts, including Sotiroff and Cerulli Associates, generally consider between $50 million and $100 million in assets within a fund’s first one or two years as an important benchmark for long-term viability. Funds that remain below that range can find it more difficult for their sponsors to cover operating costs.
Traditional ETFs holding baskets of securities continue to attract investor money, while some leveraged single-stock products have also reached substantial scale. The GraniteShares 2x Long NVDA Daily ETF, for example, has accumulated around $3.9 billion in assets.
Such successes are not representative of the wider market.
Morningstar Direct data shows that the average leveraged ETF has shrunk from $272.2 million in assets at the end of 2024 to $63.3 million currently. Half of the funds in the category hold less than $7 million.
Leveraged ETFs are generally designed to deliver a multiple of an underlying stock’s return over a single trading session, making their performance and risk profiles significantly different from conventional long-term investment products.
New launches increasingly target smaller companies
Amrita Nandakumar, president of ETF launch specialist Vident, believes the market is approaching the end of its second major expansion phase. She said successive waves of products are “scraping the bottom of the barrel” as issuers increasingly focus on smaller, more speculative or relatively untested companies.
The number of new products nevertheless continues to rise. A record 244 leveraged ETFs had been launched by mid-August, compared with 229 during the whole of 2025.
“The first wave we saw a few years ago, and it involved creating leveraged ETFs tied to the names that you’d expect, big, widely watched and volatile companies” such as Nvidia, Tesla and Alphabet, Nandakumar said.
The second wave, which began last year, has broadened into substantially smaller companies. Some filings have even proposed funds linked to prominent private companies that have neither gone public nor filed for an initial public offering.
Other proposals seek to provide twice the daily upside, or downside, of AI-focused ETFs that themselves had only recently launched.
“You don’t necessarily see these products being listed on the biggest or most stable companies any longer,” said Elisabeth Kashner, director of global funds research at FactSet.
Leveraged ETF closures accelerate in 2026
Signs of consolidation are already emerging. Morningstar data shows that 63 leveraged single-stock ETFs have closed in the US so far in 2026, compared with only three during 2025.
Among those were Tradr ETFs linked to software companies MongoDB and Datadog, both of which were affected earlier in the year by a sharp selloff amid concerns about the potential impact of artificial intelligence on their business models.
“We are consistently evaluating our suite of funds to gauge investor demand,” said Matt Markiewicz, head of product and capital markets at Tradr.
Another closure illustrated the particular risks associated with leveraged products. GraniteShares liquidated a 2x leveraged ETF linked to Lucid Group after shares of the electric vehicle manufacturer plunged around 51% in a single session on July 14.
A decline of that magnitude in the underlying asset of a 2x leveraged fund can reduce the ETF’s net asset value to zero.
“If a fund is below break even or shows no real signs of adoption by the market, we’ll close it,” said GraniteShares CEO Will Rhind. He did not comment specifically on the Lucid-linked fund.
New entrants continue to expand
Despite the challenges, some firms remain willing to compete aggressively in the leveraged single-stock ETF market.
Silicon Valley startup Corgi Invest has launched 127 leveraged or inverse single-stock products so far this year and intends to introduce additional funds.
Founder Emily Yuan said the company does not plan to launch products simply to close them shortly afterwards.
Corgi’s ETFs have attracted an average of approximately $1 million in assets so far, but Yuan believes the company can gain market share by offering lower fees than competitors.
“If you make good products, the money will come,” she said.