Tesla ETF Rout Deepens As Nvidia Democratizes Self-Driving AI

Tesla Inc (NASDAQ:TSLA)–linked ETFs are coming under renewed pressure as the assumptions underpinning the EV maker’s long-term growth story face fresh scrutiny. The ProShares Ultra TSLA ETF (NYSE:TSLI) is down around 27% from its December peak, highlighting how quickly leveraged exposure can unwind when sentiment shifts against the stock.

The latest catalyst came this week after Nvidia Corp’s (NASDAQ:NVDA) CES announcements, which sent Tesla shares down 4.1% in a single session. Nvidia unveiled Alpamayo, a suite of open-source AI models aimed at accelerating autonomous vehicle development. For Tesla-focused ETFs, the concern isn’t Nvidia entering the car business, it’s the AI giant enabling everyone else to compete.

For a long time, bullish fund flows into products like Direxion Daily TSLA Bull 2X Shares (NASDAQ:TSLL) have long been fueled by expectations that Tesla will dominate robo-taxis and autonomous software. In the first half of 2025, TSLL saw inflows of almost $4 billion, per data accumulated by Etfdb. However, the fund saw consistent outflows July onward, as sentiments shifted. And Nvidia’s strategy, of selling the “brains” of autonomy to any automaker willing to pay, just risks diluting Tesla’s dominance further, increasing downside volatility for leveraged Tesla ETFs.

The pressure is not limited to daily leveraged funds. Roundhill TSLA WeeklyPay ETF (BATS:TSLW), which targets enhanced weekly returns tied to Tesla, has also struggled as sustained weakness in the stock compresses both NAV and income potential.

Even inverse exposure has been unforgiving. T-Rex 2x Inverse Tesla Daily Target ETF (BATS:TSLZ), a leveraged inverse Tesla ETF, has failed to consistently benefit from Tesla’s slide due to choppy price action and daily reset effects.

Adding to investor unease is growing competition in adjacent markets Tesla is counting on for future growth. Autonomous driving and humanoid robotics are increasingly crowded trades. Mobileye Global Inc’s (NASDAQ:MBLY) recent $900 million acquisition of an AI humanoid robotics startup underscores how quickly rivals are positioning themselves in areas Tesla investors view as core to the company’s long-term upside.

That timing matters. Meaningful revenue from robo-taxis or humanoid robots remains years away, yet Tesla still trades at roughly 192.3 times estimated 2026 earnings, per Benzinga Pro. For leveraged ETFs like TSLI and TSLL, any recalibration of those expectations can translate into outsized losses in a matter of sessions.

In short, Tesla-linked ETFs are trading less on fundamentals and more on belief. Nvidia’s move didn’t kill the autonomy dream, it just made it more competitive. And for ETFs built to magnify Tesla’s daily moves, competition is not good news.

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