Hargreaves Lansdown investors buy Nvidia shares via ETP, which is risky

It is no secret that British investors are buying Nvidia (NASDAQ: NVDA) recently. Interestingly, Hargreaves Lansdown data shows that many investors invest through a product called Leverage PLC Shares 3X Nvidia ETP or ‘3NVD’.

So, what is this product all about? And is it a good way to buy chip stocks for my portfolio?

Exposure to Nvidia used

Leverage Shares PLC 3X Nvidia ETP is a company London Stock Exchange-an exchange-traded product (ETP) that provides exposure to Nvidia stock. However, it does not provide standard exposure to growth stocks.

Instead, it provides three times exposure to it. In other words, if Nvidia shares were to rise 1% on the day, the ETP should theoretically rise by about 3%.

High risk, high return

Now, the thing to understand about leverage is that it can magnify both profits and losses. So its use can be very risky.

If Nvidia shares fell 5% in a single day, the value of this ETP would fall by about 15%. That’s a big loss.

The potential for severe losses was illustrated earlier this month when Nvidia experienced some volatility. When the company’s share price fell nearly 10% on September 3, the price of this ETP fell from $50.21 to $35.81. That’s a loss of about 29% – ouch!

It is worth noting that to break even after a 29% loss, you would need to generate a profit of around 41%.

My thoughts

Given the high risk of this product, I won’t be touching it anytime soon. It’s definitely too risky for me.

Despite this, I remain very bullish on Nvidia itself. Many people believe the stock is in an AI bubble today. I disagree.

I think it’s a company with significant growth potential thanks to its leading position in the AI ​​chip market. And I think the stock is reasonably valued right now.

Analysts expect Nvidia to post earnings of $4.02 per share for the year ending January 31, 2026 (the next fiscal year) (actually, I think earnings could be significantly higher). That puts the stock on a forward price-to-earnings (P/E) ratio of less than 30.

Given the projected revenue and earnings growth of over 40% next year, this multiple seems very fair to me.

We are at the beginning of a new industrial revolution.

Nvidia CEO Jensen Huang

I will buy more shares soon

Of course, there are many risks here.

Currently, most of the growth is coming from spending by other Magnificent Seven companies. This year, for example, about 45% MicrosoftThe company’s capital expenditure will go to Nvidia.

If these companies were to cut back on AI spending, Nvidia’s growth could slow and its stock could fall.

Another risk is new AI chips from competitors. Currently, many Mag 7 companies are working on their own chips.

However, given that AI is realistically still in its infancy, I see a long way to go for Nvidia to grow. And while this is already a big position for me, I plan on buying some shares of the company for my portfolio soon.