Why the Roundhill Generative AI & Technology ETF is Worth Considering

Artificial Intelligence (AI) is rapidly evolving and increasingly attracting the attention of investors, particularly due to the impressive returns of stocks like Nvidia, which have surged by more than 700% since the beginning of 2023. AI has the potential to trigger a productivity boost in the global economy, potentially creating unprecedented economic value in the coming years. However, past technological revolutions—such as the internet, enterprise software, and cloud computing—demonstrate that not every company will be successful in the long term. Investors looking to invest in AI stocks should therefore be prepared for fluctuations, even among leading companies in the sector. For example, Nvidia recently experienced a 27% decline between June and August. One way to mitigate these uncertainties is to invest in an exchange-traded fund (ETF) that focuses on the AI industry. Many ETFs are actively managed, allowing a professional team to adjust the portfolio as needed, while investors can pursue a passive investment approach. An ETF can hold dozens or even hundreds of individual stocks, minimizing the risk of catastrophic loss if one or two companies fail. This is particularly important in the AI industry, as it is nearly impossible to predict the winners and losers of the coming years. The Roundhill Generative AI & Technology ETF (NYSE: CHAT) could be an excellent choice for investors. The managers at Roundhill believe that AI will be one of the most influential technologies of the coming decades. According to a study cited by Roundhill from Goldman Sachs, AI could contribute a staggering $7 trillion to the global economy by 2032. The Roundhill ETF holds 55 different stocks from the hardware and software sectors of the AI industry. The top 10 positions include some of the most sought-after AI stocks of the past year, such as Nvidia, Microsoft, Alphabet, and Amazon. These 10 stocks account for 43.8% of the total value of the ETF portfolio, which carries some risk but underscores the high quality of these stocks. Nvidia develops powerful chips for data centers for AI development, with demand exceeding supply. Microsoft, Alphabet, and Amazon use Nvidia's GPUs to provide computing power to their cloud customers and develop their own AI products. The Roundhill ETF also includes significant AI stocks outside its top 10 positions, such as Oracle and Micron Technology. Since its launch in May 2023, the ETF has gained 40%, outperforming the S&P 500 Index. However, investing in the Roundhill ETF also carries risks. If AI does not meet high expectations, stocks like Nvidia could lose value, leading to weaker ETF performance. The ETF also has an expense ratio of 0.75%, which is higher than some other providers but justified by the specialized, active management. For investors who do not have the time to follow every development in the fast-paced AI industry, the Roundhill ETF could be an attractive alternative to individual investments in AI stocks.