The Nasdaq-100 index is packed with some of America's largest technology companies, including those leading the artificial intelligence (AI) revolution. It took a brief trip into bear territory earlier this year following the announcement of President Trump's "Liberation Day" tariffs, but it has since rocketed higher by a whopping 50% from its April low point, setting a new record high and kicking off a fresh bull market.
Investors who haven't owned AI stocks over the last few months have likely missed out on some of the biggest gains this new bull market has offered so far. Going back even further, AI stocks have fueled a significant portion of the gains in Nasdaq-100 since this technology started gaining traction in early 2023.
Fortunately, it probably isn't too late for investors to capture this opportunity. The Roundhill Generative AI and Technology ETF (CHAT 3.45%) is an exchange-traded fund (ETF) that exclusively invests in the companies driving the AI boom. A single share costs under $70, and here's why it could be a great addition to any diversified portfolio.
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A concentrated portfolio of the world's best AI stocks
ETFs can hold hundreds, or even thousands of individual stocks, but the Roundhill Generative AI and Technology ETF holds just 45. It focuses specifically on companies developing the infrastructure, platforms, and software powering the AI boom, and it's quite top-heavy, with its five largest holdings representing 25.1% of the total value of its portfolio.
- Nvidia (NVDA 3.58%) supplies advanced graphics processing units (GPUs) for data centers. Its latest Blackwell Ultra variants are the most sought after chips in the world for developing AI models, thanks to their industry-leading processing power and energy efficiency.
- Alphabet (GOOG 2.89%)(GOOGL 2.94%) owns Google Search, which is the world's largest internet search engine. However, it also developed the Gemini family of large language models (LLMs), which tens of thousands of organizations have placed at the foundation of their AI software.
- SK Hynix is one of the world's top suppliers of memory and storage chips for data centers, smartphones, and computers. Its high-bandwidth memory solutions for the data center unlock maximum processing speeds from GPUs, so they are critical in AI workloads.
- Microsoft (MSFT 1.63%) is weaving its Copilot AI assistant into most of its flagship software products, including Windows, Bing, and 365 (Word, Excel, and PowerPoint). Its Azure cloud platform is also a top destination for developers seeking state-of-the-art data center capacity to build AI software.
- Broadcom (AVGO 4.42%) supplies industry-leading networking equipment for data centers, including its Tomahawk switches which regulate how fast data travels between chips and devices. The company's AI accelerators have also become a popular alternative to traditional GPUs, because of their customizable nature.
Outside of its top five positions, the Roundhill ETF holds a number of other AI leaders including Advanced Micro Devices, Oracle, Amazon, Meta Platforms, and Palantir Technologies.
NYSEMKT: CHAT
Key Data Points
The Roundhill ETF has delivered blockbuster returns since its inception
The Roundhill Generative AI and Technology ETF was established in May 2023, so it doesn't have a very long track record of performance for investors to analyze. However, it has soared by an eye-popping 150% since then, crushing the Nasdaq-100 which has returned 91%, and also the S&P 500 (^GSPC 1.66%) which is up 66% over the same period.
That performance comes at a cost because the ETF has an expense ratio of 0.75%, meaning an investment of $10,000 would incur an annual fee of $75. Traditional passive index funds tend to be significantly cheaper; those issued by Vanguard, for example, have expense ratios of as low as 0.03%.
But the Roundhill ETF is actively managed which means a team of professionals regularly buys and sells stocks based on what they think will deliver the best results, and that expertise costs money.
Despite the Roundhill ETF's strong returns, investors shouldn't put all of their eggs in one basket. Since the fund is so heavily geared toward the success of AI, any cracks in this emerging industry could lead to steep losses. Instead, investors should aim to own it as part of a diversified portfolio of other ETFs and individual stocks, particularly one that has a low exposure to AI and the tech sector already.
