The S&P 500 has been on a tear in 2024, posting a remarkable 28% gain with a month still to go. This performance is more than double its historical average annual return, driven in large part by AI-focused giants like Nvidia, Meta Platforms, and Amazon. If you’ve missed out on these gains, there’s a simple and affordable way to catch up: the Roundhill Generative AI and Technology ETF (CHAT), a highly concentrated fund of the top-performing AI stocks. Priced at just $40 per share, this ETF is an excellent choice for investors looking to tap into the ongoing AI revolution.
A Pure Play on Artificial Intelligence
According to Goldman Sachs, artificial intelligence could add $7 trillion to the global economy by 2032. The Roundhill Generative AI and Technology ETF focuses on companies leading this transformative wave. The fund holds a portfolio of 48 stocks, with its top five positions accounting for over 26% of the fund’s value.
Top 5 Stocks in the Roundhill ETF Portfolio:
| Stock | Portfolio Weighting |
|---|---|
| Nvidia | 7.28% |
| Microsoft | 5.85% |
| Alphabet (Class A) | 5.53% |
| Meta Platforms | 4.41% |
| Taiwan Semiconductor Manufacturing (TSMC) | 3.39% |
These companies represent the pinnacle of AI innovation, spanning hardware, software, and infrastructure solutions.
Why These Stocks Are Leading the AI Revolution
1. Nvidia: The Hardware Powerhouse
Nvidia supplies the world’s most advanced GPUs for AI applications. Its data center revenue has grown by triple-digit percentages for six consecutive quarters, driven by unprecedented demand for its cutting-edge chips. With the launch of its new Blackwell GPUs, Nvidia is set to maintain its leadership position in AI hardware.
2. Microsoft and Alphabet: Software Pioneers
Microsoft and Alphabet dominate the AI software market, leveraging their cloud computing platforms and in-house AI tools:
- Microsoft developed its Copilot virtual assistant with help from OpenAI, further integrating AI into its software suite.
- Alphabet launched its Gemini AI models, which power a growing ecosystem of AI-driven services for businesses worldwide.
3. Meta Platforms: The Open-Source Innovator
Meta Platforms introduced Llama, the most popular open-source large language model (LLM). These models enable new AI functionalities for platforms like Facebook and Instagram, keeping Meta at the forefront of consumer-facing AI applications.
4. Taiwan Semiconductor Manufacturing (TSMC): Foundry of the Future
TSMC manufactures the advanced semiconductors powering AI systems. As a critical supplier to Nvidia and other tech giants, it plays a pivotal role in the AI supply chain.
Other notable holdings in the ETF include Palantir Technologies, AMD, Oracle, and Amazon, each contributing unique strengths to the AI ecosystem.
Performance and Costs: How the Roundhill ETF Stacks Up
Since its launch in May 2023, the Roundhill Generative AI and Technology ETF has delivered impressive returns:
- A 57% gain since inception, outpacing the S&P 500’s 47% total return over the same period.
- A 29% gain in 2024, slightly ahead of the broader market.
Expense Ratio: A Trade-Off for Specialization
The ETF’s expense ratio is 0.75%, higher than general ETFs like those managed by Vanguard, which typically charge less than 0.1%. While the higher cost reflects the specialized nature of the fund, it can reduce long-term returns, so investors should weigh this against the ETF’s strong performance potential.
AI Growth: A Massive Tailwind for the Roundhill ETF
The success of the Roundhill ETF depends heavily on the future of AI, and the outlook is promising:
- Goldman Sachs estimates a $7 trillion economic impact from AI by 2032.
- Morgan Stanley projects four companies—Microsoft, Alphabet, Amazon, and Meta—will spend a combined $300 billion on AI infrastructure in 2025 alone.
This wave of investment will fuel growth for Nvidia, AMD, and other chipmakers, creating a virtuous cycle that benefits the entire ETF portfolio.
Balancing Risks and Rewards
While the Roundhill ETF offers exciting growth opportunities, it comes with risks:
- Concentration Risk: With just 48 holdings and heavy weighting in a few key stocks, the ETF is more volatile than broader market funds.
- Dependence on AI: If AI adoption fails to meet lofty expectations, many of the ETF’s holdings could face significant downturns.
- Expense Ratio: Over time, the higher management costs could eat into returns.
To mitigate these risks, the Roundhill ETF is best used as part of a diversified investment portfolio, complemented by other funds or stocks with limited exposure to AI.
A Compelling Bet on the Future of AI
For investors looking to capitalize on the AI boom without picking individual stocks, the Roundhill Generative AI and Technology ETF is an excellent choice. With its strong track record, exposure to leading companies, and affordable price of just $40 per share, it provides an easy and effective way to invest in the next wave of technological innovation.
While the fund carries risks associated with its high concentration and dependence on AI growth, the potential rewards make it a no-brainer option for long-term investors. As AI continues to reshape industries and economies, the Roundhill ETF is well-positioned to deliver solid returns in the years ahead.