The artificial intelligence revolution is well underway. With so many companies vying for a slice of the pie, picking out the most likely potential winners in this emerging technological sphere can be a challenge. But there's an easier way to invest in the trend -- purchasing an ETF. And among those that focus on this part of the market, the Roundhill Generative AI & Technology ETF (CHAT 2.28%) could be your best bet for one obvious reason.
NYSEMKT: CHAT
Key Data Points
Artificial intelligence spending will grow more than investors may realize
Adoption of AI software products is exploding across nearly every sector, and AI infrastructure companies are racing to build enough capacity to meet demand.
But here's the thing: This industry is still in its early days. The AI market globally was valued at just $189 billion in 2023, but according to a report from United Nations Trade and Development, by 2033, it will be worth an astounding $4.8 trillion. That's an annual growth rate of more than 30%.
Image source: Getty Images.
Investing in the Roundhill Generative AI & Technology ETF is a great way to make sure your portfolio benefits from the ongoing rise in spending on AI technologies. Most of its 39 holdings are directly exposed to that rising demand. Nvidia, for example -- the world's leading supplier of AI GPUs -- is the fund's biggest holding, with a portfolio weight of 8.1%. Microsoft and Oracle -- both of which operate AI data centers -- are also among the ETF's top five holdings.
This ETF gives investors a more diversified AI position than they'd get by buying a smaller, customized basket of AI stocks. That offers the upside of reduced risk from any specific holding's potential poor performance, but the downside is, it dilutes the gains of its biggest winners. And the expense ratio of 0.75% isn't particularly low. But generative AI -- the category of AI this ETF focuses most on -- is growing faster than the AI industry overall. Diversifying your bets across businesses with higher growth potential could offset the impacts of its higher expense ratio and broader market exposure.
