The AI ETF Analysts Are Watching Closely Into June

The rapid growth of the artificial intelligence (AI) market has driven many tech stocks to their record highs over the past few years. One of the biggest catalysts for that market was the rapid adoption of generative AI tools that create new content -- such as text, images, videos, and audio -- by learning patterns from massive datasets.

From 2026 to 2033, the generative AI market could expand at a 40.8% CAGR, according to Grand View Research, as more industries adopt those tools. Therefore, it's still a great time to invest in the AI linchpins -- including Nvidia (NASDAQ: NVDA) and Broadcom -- even though their stocks have already skyrocketed over the past few years.

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However, if you want to diversify your investments across the entire generative AI market, it might be smarter to invest in an exchange-traded fund (ETF) that covers the whole sector. One of those ETFs is the Roundhill Generative AI & Technology ETF (NYSEMKT: CHAT), which promoted itself as the market's first-ever generative AI ETF upon its May 2023 launch. Let's see why analysts and investors are closely tracking this ETF -- and if it's still worth buying today.

The key facts about CHAT

CHAT has $1.75 billion in assets under management and holds 43 stocks in its portfolio. Its top six holdings are Nvidia (7.06% of its portfolio), Alphabet (6.56%), AMD (5.70%), SK Hynix (5.29%), Micron (5.24%), and Samsung (4.04%). It's risen nearly 240% since its inception, outpacing the S&P 500's 76% rally and the Nasdaq's 106% gain.

Most of that growth was driven by the AI chipmakers in its portfolio, which profited from the soaring demand for GPUs, high-bandwidth memory (HBM) chips, networking chips, and other equipment across the data center market. It was also invested in the hyperscalers that were ramping up their spending on that hardware to expand their AI ecosystems.

In other words, CHAT is an easy way to invest in both the big buyers and sellers of AI infrastructure. However, it charges an expense ratio of 0.75% because it's actively managed. By comparison, the passively managed Invesco QQQ ETF (NASDAQ: QQQ) -- which simply tracks the Nasdaq-100 (and includes several of CHAT's top holdings) -- charges only 0.18%.

That said, QQQ has only risen about 36% since CHAT's inception three years ago. Therefore, CHAT still looks like a simple way to profit from the secular expansion of the AI market without fretting too much over individual chipmakers or high-spending hyperscalers.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.