Artificial intelligence (AI) has become a key driver of returns in the current stock market, and we may still be in the early stages of this technological revolution. For investors lacking relevant experience, gaining exposure through one or two exchange-traded funds (ETFs) is equivalent to directly holding a full portfolio of AI stocks. Among the many options available, the Roundhill Generative AI and Technology ETF (CHAT) and the Vanguard Mega Cap Growth ETF (MGK) are two noteworthy products.
CHAT focuses on investing in key companies driving the AI revolution, spanning platforms, infrastructure, and software. This fund is actively managed, holding only 38 stocks, with Roundhill’s professional team regularly adjusting the portfolio to pursue optimal returns. Its top five holdings, which collectively account for 25.6% of the fund’s weight, are among the most influential companies in the AI space and significantly impact the fund’s performance. NVIDIA, as a leader in AI chips, has made its Blackwell Ultra architecture GPU the industry standard for next-generation AI inference. Alphabet and Microsoft not only develop their own AI assistants but are also the world’s leading cloud service providers, renting out computing power and offering ready-made large language models to help enterprises accelerate AI application development. Oracle is renowned for its cost-effectiveness and exceptional AI workload processing capabilities, and its potential for future geographic expansion could deliver substantial returns. Although the fund has an expense ratio of 0.75%, higher than many passive products, it has achieved a 111% return since its inception in May 2023, far surpassing the S&P 500’s 55% gain over the same period, demonstrating strong outperformance.
On the other hand, MGK is a passive fund that tracks the CRSP US Mega Cap Growth Index and holds only 69 stocks. These 69 companies account for 70% of the total market capitalization of all 3,508 stocks listed on US stock exchanges, reflecting the high concentration of technology and related sectors in the modern economy. The fund’s top five holdings are similarly focused on AI giants: Apple integrates AI features into over 2.35 billion active devices worldwide through its Apple Intelligence software, potentially making it the largest consumer AI touchpoint. Amazon not only leads the market with its AWS cloud services but has also deployed over 1,000 AI applications across e-commerce, advertising, and streaming. Since its inception in 2007, the fund has delivered an annualized return of 13.5%, outperforming the S&P 500’s 10.4%. Particularly over the past three years, amid the rise of AI, its average annual gain has been close to 26%, making its performance especially outstanding.
