This New ETF Invests in the Top Memory Stocks. Is It a No-Brainer Buy for Artificial Intelligence (AI) Investors?
Key Points
Memory and storage stocks have been soaring over the past year due to incredibly high demand for their products.
As tech companies invest more in artificial intelligence (AI), demand for these products inevitably increases.
The recently launched Roundhill Memory ETF gives investors an easy way to gain exposure to top memory stocks.
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Opportunities in tech, particularly in artificial intelligence (AI), have driven significant growth for many types of companies. Recently, companies involved in selling memory and storage products have been experiencing tremendous growth. These products are needed to train and maintain AI models.
The Roundhill Memory ETF (NYSEMKT: DRAM) is a new exchange-traded fund (ETF) that launched in April, and it's an enticing new option for investors who want exposure to memory and storage stocks. The fund is already up an impressive 39% since it began trading. Is it a no-brainer buy for AI investors?
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The fund has just 11 holdings, but it includes the top stocks
The Roundhill Memory ETF isn't one of the more diversified funds you'll find, as it only has 11 holdings in its portfolio. However, it also aims to be a pure-play ETF focused on memory and storage stocks, designed for investors who want exposure to that theme. The company believes that the growth story related to AI infrastructure could play out over multiple decades.
The ETF's portfolio is fairly narrow in size, and there's significant exposure to just a few stocks. SK Hynix, Micron Technology, and Samsung Electronics each account for more than 22% of the fund's holdings, and combined, they make up 73% of the entire portfolio. How these stocks perform will have a huge impact on the fund's overall performance.
The fund's expense ratio is 0.65%, which is a bit higher than what you can get with many other ETFs, but given its impressive early gains and the potential for even more upside in the long run, that may not dissuade many growth-oriented investors.
Is the Roundhill Memory ETF worth buying right now?
If your goal is to invest in the leading memory stocks, the Roundhill Memory ETF can make it easy to gain exposure to many different companies. The risk, however, is that once supply catches up with demand, the price for memory and storage products will inevitably come down, and that will weigh down these high-flying stocks.
There's considerable risk here, and with a high concentration of the fund's holdings on just three stocks, you'll need to keep that in consideration when thinking about whether to add this ETF to your portfolio. The fund is by no means a no-brainer buy for AI investors, and there are many more diversified funds out there to consider instead. This is mainly an option for investors who want exposure to memory and storage stocks and are willing to take on the risks that come with doing so.
Should you buy stock in Roundhill ETF Trust - Roundhill Memory ETF right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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