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Roundhill's AI-focused fund delivered 55.2% returns but carries higher volatility and fees. State Street's broader tech ETF offers lower costs and steadier performance for long-term investors.
This section provides a comparative overview of CHAT and XLK, detailing metrics like issuer, share price, expense ratio (0.75% for CHAT vs. 0.08% for XLK), 1-year return (55.2% for CHAT vs. 37.9% for XLK), dividend yield (1.9% for CHAT vs. 0.4% for XLK), beta, and assets under management (AUM). XLK is noted for its affordability with a low expense ratio, while CHAT offers a higher dividend yield but comes with a higher expense ratio and a higher beta indicating more volatility.
Comparing the performance and risk of both ETFs, CHAT experienced a maximum drawdown of (31.3%) over 3 years and grew an initial $1,000 investment to approximately $3,172. In contrast, XLK had a smaller maximum drawdown of (25.7%) and grew the same $1,000 to about $2,175 over the same period. This indicates that while CHAT offered significantly higher returns, it also came with greater risk.
XLK tracks the Technology Select Sector Index, maintaining 100% exposure to the information technology sector with 73 securities. Its largest holdings include Nvidia (14.31%), Apple (12.98%), and Microsoft (9.90%). Launched in 1998, it paid a 0.4% dividend yield over the last 12 months. CHAT takes a thematic approach to generative AI, with 52 securities comprised of 77% technology, 15% communication services, and 5% consumer cyclical stocks. Its largest positions include Nvidia (6.86%), Alphabet (5.46%), and SK Hynix (4.57%). Launched in 2023, CHAT offered a 1.9% dividend yield over the trailing 12 months.
For investors seeking exposure to the generative AI sector, the author recommends CHAT. Despite its higher expense ratio, CHAT's active management allows it to adapt to the rapidly evolving AI landscape and invest in key AI players regardless of traditional sector classifications, including Alphabet-owned Google which is not in XLK. CHAT also boasts a higher dividend yield and strong one-year returns, though its recent launch in 2023 means it lacks historical performance data during economic downturns and its concentrated focus on GenAI stocks makes it more susceptible to industry-specific declines. Conversely, XLK's broader technology sector diversification and lower expense ratio make it a more conservative option for those looking for steadier performance.