The Roundhill Generative AI & Technology ETF (CHAT 1.16%) stands out for its active approach and recent strong performance, while the Vanguard Information Technology ETF (VGT 0.36%) offers lower costs, greater scale, and broader tech sector exposure.

Both funds target technology, but with distinct approaches: CHAT is an actively managed portfolio focused on generative artificial intelligence (AI) themes, whereas VGT passively tracks a wide information technology benchmark. For investors weighing concentrated AI bets versus broad-based tech sector exposure, this comparison can help clarify the trade-offs.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

VGT is significantly more affordable on fees, charging just 0.09% versus CHAT’s 0.75% annual expense ratio. While CHAT has posted higher 1-year returns, that comes with higher costs and a much smaller pool of assets under management.

Performance & risk comparison

CHAT’s active AI focus has led to sharper gains compared to VGT, though both have experienced deep drawdowns over the last year. CHAT also shows a considerably higher beta, signaling greater volatility than VGT.

What's inside

VGT is a passive fund with a nearly 22-year track record, holding 314 stocks from within the technology sector. Its largest positions are Nvidia, Apple, and Microsoft, reflecting a heavy tilt toward industry-leading U.S. tech stocks. VGT’s ultra-broad holdings may appeal to those seeking sector-wide exposure and liquidity.

CHAT focuses on generative AI, with around 74% of the fund allocated to technology stocks, 20% toward communication services, and the remaining assets toward consumer cyclicals. Its top holdings are Nvidia, Alphabet, and Oracle.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

VGT and CHAT are both tech-focused ETFs, but they diverge in terms of diversification, costs, and sector focus.

VGT is much broader, encompassing the entire technology sector with over 300 holdings. This diversification may be appealing to more risk-averse investors, as it could help avoid more significant price fluctuations during periods of volatility.

CHAT, on the other hand, is a narrower fund focusing solely on generative AI stocks. The AI sector, in general, can be highly volatile, and its future is still uncertain right now. Those factors increase its risk level, so investors can expect more severe ups and downs with this ETF. That said, sometimes more targeted funds can experience higher returns, and CHAT has significantly outperformed VGT over the past year.

CHAT also has a much shorter track record than VGT. It was launched in 2023, while VGT was founded in early 2004. Younger funds can carry more risk, as there's not much performance data to examine yet.

Finally, these two funds carry significantly different expense ratios, which could make a difference for fee-conscious investors. VGT is far more affordable, mostly because it's a passively managed fund. CHAT is actively managed, so investors can expect to pay more in fees. For long-term investors and those with large account balances, that difference in expense ratios could add up to thousands of dollars.

Investors looking for a cost-effective ETF to gain exposure to the entire tech sector may find VGT more appealing. Those looking specifically to own a slice of the generative AI market, however, could be drawn more to CHAT.

Glossary

ETF: Exchange-traded fund; a fund that trades on stock exchanges and holds a basket of assets.
Expense ratio: The annual fee charged by a fund, expressed as a percentage of assets under management.
Actively managed: A fund where managers select investments, aiming to outperform a benchmark, rather than tracking an index.
Passively managed: A fund that aims to replicate the performance of a specific index, with minimal manager intervention.
Beta: A measure of a fund's volatility compared to the overall market, typically the S&P 500.
Asset under management (AUM): The total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a specific period.
Sector focus: The concentration of a fund's investments within a specific industry or group of related industries.
Generative AI: Artificial intelligence models that create new content, such as text, images, or code, based on training data.
Information technology benchmark: A standard index representing the performance of the technology sector, used for comparison.
Liquidity (in ETFs): The ease with which ETF shares can be bought or sold without significantly affecting the price.