Can This AI ETF Surpass 300% Returns and Challenge Nvidia's Dominance?

The rise of artificial intelligence has reshaped the investment landscape, with leveraged ETFs emerging as a compelling alternative to direct stock exposure in AI megacaps like Nvidia. As of December 2025, the Leverage Shares +3x Long Artificial Intelligence ETP has surged more than 120% year-to-date, raising a critical question: Could this ETF-or others in the semiconductor and AI space-achieve 300% returns and disrupt the dominance of industry titans like Nvidia?

The Case for Leveraged AI and Semiconductor ETFs

Leveraged ETFs amplify returns by using derivatives and debt to magnify exposure to underlying indices or sectors. In 2025, this strategy has paid off for AI and semiconductor-focused funds. The AI ETP, for instance, provides diversified exposure to the AI ecosystem, including semiconductor manufacturers, cloud infrastructure providers, and software innovators. Its 120% gain in 2025 pales in comparison to the 458% return of the Direxion Daily South Korea Bull 3X Shares (KORU), which capitalized on AI-driven demand for chips from Samsung and SK Hynix. Meanwhile, the Direxion Daily Semiconductors Top 5 Bull 2X Shares (TSXU) and Direxion Daily Semiconductor Bull 3X Shares (SOXL) have gained traction by targeting industry giants like AMD, ASML, and TSM, with SOXL surging over 12% in a single week amid falling inflation expectations.

These returns highlight the scalability of leveraged ETFs. Unlike individual stocks, which require precise timing and company-specific insights, ETFs spread risk across multiple holdings. For example, the AI ETP's diversified portfolio reduces overexposure to any single firm, even as it leverages the sector's collective growth. This makes it an attractive option for investors seeking to capitalize on AI's broad infrastructure needs without betting on a single winner.

Nvidia's Unshakable Position

Despite the allure of leveraged ETFs, Nvidia's dominance in the AI sector remains formidable. In Q3 2025, the company reported $57 billion in revenue, with data center sales alone hitting $51.2 billion and a gross margin of 73.4%. Its recent product updates, including the Nemotron 3 AI model and H200 data center chips, have further solidified its leadership in AI accelerators. Even as leveraged semiconductor ETFs like the SPDR S&P Semiconductor ETF (XSD) returned 29% in 2025, Nvidia's stock price rebounded to $176.12 by late December 2025, outpacing broader sector gains.

The 300% Return Hypothesis

Achieving 300% returns in 2026 would require extraordinary conditions. For the AI ETP, this would mean a continuation of the 120% annualized growth seen in 2025-a scenario that assumes sustained AI demand, stable interest rates, and no major sector corrections. Historical data suggests this is possible but unlikely. Leveraged ETFs are designed for short- to medium-term gains, and their compounding effects can erode returns over extended periods. For example, SOXL's 12% weekly gain in late December 2025 was driven by a confluence of factors, including falling inflation expectations and a broader market rotation into growth stocks. Sustaining such momentum would require a perfect alignment of macroeconomic and technological tailwinds.

A more plausible path to 300% returns lies in the semiconductor subsector. The Direxion Daily South Korea Bull 3X Shares (KORU) achieved 458% in 2025 by capitalizing on Korean chipmakers' AI-related exports. If global demand for memory chips and advanced manufacturing tools accelerates in 2026, similar returns could be replicated. However, this would depend on geopolitical stability, supply chain resilience, and continued investment in AI infrastructure-a high bar even for a sector as dynamic as semiconductors.

Risks and Considerations

Leveraged ETFs are not without risks. Their use of debt and derivatives makes them highly volatile, and compounding effects can distort long-term returns. For instance, an ETF that gains 100% in a year may lose half its value if the underlying index drops 50% in a single day. Additionally, management fees and tracking errors can erode performance, particularly in leveraged products. Investors must also weigh the trade-off between diversification and concentration: while ETFs reduce company-specific risk, they remain exposed to sector-wide downturns, such as a slowdown in AI adoption or a global chip glut.

Conclusion: A Complementary, Not Replacement, Strategy

Leveraged AI and semiconductor ETFs offer a scalable, diversified way to participate in the AI revolution. The AI ETP's 120% gain in 2025 and KORU's 458% return demonstrate their potential to amplify sector growth. However, Nvidia's dominance-bolstered by its unmatched margins, product pipeline, and ecosystem-remains a formidable barrier to entry. For investors seeking 300% returns, a hybrid approach may be optimal: allocating a portion of the portfolio to leveraged ETFs for sector exposure while reserving capital for high-conviction bets on companies like Nvidia.

As AI infrastructure demand accelerates in 2026, the race between leveraged ETFs and megacaps will hinge on execution. For now, the data suggests that while ETFs can challenge Nvidia's supremacy in terms of market share, surpassing its returns will require a perfect storm of innovation, demand, and macroeconomic stability.