Who remembers the psychological thriller Memento from the year 2000?

Like the Christopher Nolan film’s central character, who has anterograde amnesia and thus cannot make long-term memories, a suite of proposed exchange-traded funds would reset hourly. Last month, Defiance ETFs filed with the Securities and Exchange Commission for 16 2x-leveraged funds that, unlike existing products in the category that reset daily, would have six “intraday execution periods,” focused on popular single stocks like SpaceX, Meta and Palantir, as well as the Roundhill Memory ETF (DRAM). While that could resonate with day traders who are quite serious about watching the clock, the strategy seems to be a different way of approaching the SEC’s 2x limit on leverage for new funds.

“They’re trying to get around concerns the SEC has expressed around higher leverage,” said Benjamin Schiffrin, director of securities policy for Better Markets. “It’s fair to say this is risky, if not riskier, than an ETF that is 5x leveraged but in a different wrapper.”

Cut It in Half and Double It

Leveraged single-stock ETFs are notorious, and sought out, for their volatility. Issuers are clear, at least in fund documents, that the products are intended to be traded intraday by experienced investors. That’s because the losses can add up and are difficult to recover from, a quality known as decay. If, for example, a stock loses 20% in a day, then fully recovers the next, investors who held a leveraged single-stock fund during that time frame will end up with less money than they started with. Adding reset periods throughout the day would make it that much more critical for traders to get in and out of the funds quickly.

“These ETFs are designed for short-term traders who actively manage their positions throughout the day,” said Roxanna Islam, head of sector and industry research at TMX VettaFi. “Because they reset multiple times throughout the trading day, they carry greater compounding risk than traditional daily-reset leveraged ETFs.” Or, as TradingBlock vice president of market strategy Michael Martin said, volatility requires bigger moves to break even.

“Intraday volatility runs hotter than close-to-close volatility in these [stock] names, and the filing says so,” he and Chief Innovation Officer Michael Rechenthin said in comments to ETF Upside. “You lose 50%, you have to make 100%. Six resets a day gives that math more chances to run.”

As trading tools, leveraged ETFs have helped some people achieve outsized returns, but many funds have lost money, which highlights the problem for buy-and-hold investors:

• The median fund return was -38% over four years, per a report from Morningstar.
• Meanwhile, the median trading volume was 22%, meaning that investors largely held positions longer than a day, the report found.

Short-Term Memory: Defiance did not respond to a request for comment about the proposed funds. But whether the SEC decides to hold up the funds is a big question: The regulator is currently collecting public comments about “novel” ETFs with strategies that resemble gambling, and some issuers appear hopeful that it will eventually overturn its 2x leverage limit. “The SEC probably will have concerns similar to the concerns they had with 5x leveraged single stock ETFs,” Schiffrin said. “It’s just not clear that retail investors are going to appreciate how quickly you can lose your money.”

If a sector rallies in a forest and no one’s there to hear it, does it really cash in?

Moderna turned investors’ heads a few weeks ago after announcing positive results in a late-stage trial for an mRNA melanoma vaccine, with the company’s stock jumping a whopping 177% the day of the announcement. The news captured headlines, but a broader biotech rally has been brewing in the background — driven by accelerating consolidation, progress in cancer drug development and artificial intelligence — powering biotech funds to levels not seen since the Covid era. Still, fund flows have been slow to catch up, meaning it could be an area of increased interest from advisors.

Healthcare flows are “pretty unimpressive,” said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. For example, the iShares Biotechnology ETF brought in $361 million in 2026, according to Bloomberg data, compared with $1.47 billion from just April to July of 2020, even though the fund’s price is now higher than it was then. “That said, you had three straight years of outflows in healthcare … So you do have a little bit of money coming back into healthcare after it’s been so beaten up.”

Room to Run

Biotech funds had a rough few years after Covid-19. At the bottom of the selloff, “well over 30% of the biotech market were trading below the value of cash on their balance sheet,” said Yuri Khodjamirian, CIO at Tema ETFs. With the tailwinds the industry is now experiencing, that sets it up for a sustained rally. “Historically, when you had rallies in the biotech index, it hasn’t just stopped with one year or two years. It kind of keeps going, particularly because the valuations are quite attractive and there’s no exuberance in terms of positioning.”

The two largest biotech funds have outperformed the S&P by a fair margin so far this year:

• The SPDR S&P Biotech ETF (XBI), with $11.4 billion under management, has climbed more than 33%, according to ETF.com.
• The iShares Biotechnology ETF (IBB), with about $10.5 billion in AUM, has gained almost 24%.

The Tortoise in the AI Race: Healthcare is a defensive sector, and one that many investors have been turning to in order to diversify against technology. But advances in artificial intelligence are poised to benefit the sector. “There is a tendency to confuse potential future returns from direct investment in AI tech stocks with the actual value of AI technology to its beneficiaries,” said Karen Andersen, head of Morningstar’s healthcare sector team. “AI beneficiaries like the pharma industry can still have strong long-term benefits from this technology … We’re still just at the beginning of a longer timeline for seeing actual financial benefits from applying AI to drug development.”

Emerging markets are booming, tech is ballooning … anybody up for a twofer?

As the American tech industry shows no signs of slowing down, some fund providers are looking abroad to get even more AI and semiconductor exposure. Recent funds from EMQQ Global and xETFs have focused on tech firms abroad, specifically in countries like China and South Korea, respectively. Late last year, Defiance also brought to market a leveraged product targeting Taiwanese semiconductors. The trend may signal a shift in how US issuers are tackling the issue of overconcentration in the market, particularly given certain American products’ reliance on emerging market companies’ infrastructure and hardware.

“AI, as it has arrived and become a bigger part of the economy and stock market, has also arrived in emerging markets,” said Kevin Carter, founder of EMQQ Global, an emerging markets investment and research firm that just launched a fund focusing on Chinese large language models. “Emerging markets are relevant for a number of different AI reasons, one of those [being] that Asian hardware manufacturers are basically making all the profits coming from making data centers.”

More Themes, Please

The proliferation of new products targeting South Korean companies, in particular, points to the emergence of even more niche thematics, funds that target things like memory or photonics. Combining emerging markets with tech is just the latest way to get into a concentrated but high-performing sector, said Johnny Wu, CEO of xETFs, which recently launched a Korean semiconductor fund. Since many semiconductor strategies are “US-centric,” he said, having a Korea-specific fund can fill a gap in investors’ portfolios while offering access to potentially massive returns. (South Korea’s KOSPI index was the best-performing in the world last year.) The fervor also shows in the scale of Korea’s stock market fallout from leveraged funds, as regulations tighten on investors’ ability to trade them. Getting in on Korea now is a bet on that market’s continued success, Wu said.

“There’s a saying, the best time to plant a tree is 20 years ago. So yes, there’s competition from companies in China and other areas, but for them to catch up, that will take a better part of five to 10 years,” Wu added. Still, such products have high fees, as these things often do; EMQQ’s new fund has an expense ratio of 86 basis points.

Wait, Open-Weight? One reason a fund might exclude American AI companies is US models’ closed, as opposed to open, status, Carter said. Chinese LLMs tend to be “open-weight,” he added, meaning the systems are available publicly for anyone to download and alter.

“It’s basically a US-versus-China story, and the big difference is US models are closed models,” Carter said. “I mean, Airbnb is built on China’s open-weight models … In the development community in the United States, there’s been a lot of acceptance already of open-weight models from China.”