Key Takeaways
- Technology stocks make up roughly 70 % of the Nasdaq‑100, giving the index its growth edge but also higher volatility.
- The Roundhill Generative AI and Technology ETF (CHAT) offers concentrated exposure to 52 AI‑focused companies, with the top five holdings representing about one‑quarter of the fund.
- Despite a 20 % pull‑back from its record high, the ETF is still up 40 % year‑to‑date in 2026 and has delivered a 220 % return since its May 2023 launch—more than double the Nasdaq‑100’s gain over the same period.
- Active management lets the fund increase weight in winning AI stocks and trim laggards quickly, but the concentrated portfolio could suffer steep losses in a prolonged AI downturn.
- The ETF’s expense ratio of 0.75 % is modest in absolute terms but 25 × higher than ultra‑low‑cost index funds, suggesting a small position size within a diversified portfolio.
Nasdaq‑100’s Tech‑Heavy Composition
Almost 70 % of the Nasdaq‑100 index’s value is occupied by technology stocks, which is why it tends to outperform the more diversified S&P 500. However, it can also be more volatile during periods of uncertainty, and it’s currently down 8 % from its recent peak as investors trim their exposure to the high‑flying artificial intelligence (AI) trade. This concentration means that when AI‑related names rally, the index lifts sharply; conversely, any broad‑based tech sell‑off drags the benchmark down disproportionately.
A Buying Opportunity for Long‑Term AI Believers
But for investors who believe in AI’s long‑term potential, this could be a great buying opportunity. Picking winners and losers won’t be easy, so it might be a better idea to consider an exchange‑traded fund (ETF) like the Roundhill Generative AI and Technology ETF (CHAT -4.40%), which holds 52 of the AI industry’s fastest‑growing stocks. The ETF is currently down 20 % from its record high amid the broader tech sell‑off, and investors can now scoop up a single share for under $85. This price dip presents a potential entry point for those willing to weather short‑term turbulence in exchange for exposure to the sector’s structural growth.
What the Roundhill ETF Actually Holds
The Roundhill Generative AI and Technology ETF exclusively invests in companies developing the platforms, software, and infrastructure driving the AI revolution forward. It’s an actively managed fund, meaning a team of portfolio managers carefully selects the stocks that they believe will deliver the best returns. It differs from a passive fund, which simply mimics the holdings of an index like the Nasdaq‑100 or the S&P 500. Active funds have the freedom to invest aggressively in stocks that are working and quickly trim those that aren’t, which can be a recipe for exceptional returns.
Top Holdings and Their Weightings
Although holding 52 different stocks, the top five positions in the Roundhill ETF account for 24 % of the total value of its portfolio — and they have been five of the best‑performing names in the AI industry over the last few years. The current weightings (as of July 26, 2026) are: Nvidia (NVDA) 6.61 %; Alphabet (GOOG/GOOGL) 5.30 %; Broadcom (AVGO) 4.22 %; SK Hynix (SKHY) 4.15 %; and Advanced Micro Devices (AMD) 3.71 %. This concentration lets the fund benefit disproportionately from upside in these leaders while still maintaining diversification across the broader AI ecosystem.
Why Nvidia Remains a Core Pillar
Although Nvidia stock is having a forgettable 2026, with a return of just 10 % so far, it’s up more than tenfold since the AI boom started gathering momentum in early 2023. The stock is actually cheap right now, paving the way for more potential upside as demand continues to outstrip supply for the company’s data center graphics processing units (GPUs), which are the industry’s best chips for AI training and inference workloads. This valuation gap makes Nvidia an attractive anchor for the ETF, even amid short‑term price chop.
Complementary Chip and Memory Players
Broadcom and AMD are both competing with Nvidia in the data center chip market. Alphabet is another emerging supplier in this space, after it recently agreed to start selling its Tensor Processing Units (TPUs) to other businesses. It uses these chips internally to train its Gemini models, which underpin the growing list of AI‑powered features in its Google Search platform. Korea‑based SK Hynix is one of the world’s largest suppliers of high bandwidth memory (HBM), which is a key component in the AI data center hardware stack. It competes with America’s Micron Technology, which is also in the Roundhill ETF. Shares of SK Hynix and Micron have delivered blistering year‑to‑date returns of 160 % and 190 %, respectively. These holdings give the fund exposure to the full stack—from compute to memory—that powers modern AI workloads.
Broader AI Cloud and Software Exposure
Other AI infrastructure stocks, such as Samsung Electronics and ASML Holdings, are also in this ETF, as are AI cloud and software powerhouses like Amazon and Microsoft. This blend ensures that the fund is not limited to pure‑play chipmakers; it also captures value from the companies that provide the AI services, platforms, and tools that enterprises adopt. Such diversification within the AI theme helps mitigate the risk that any single sub‑segment (e.g., GPUs) could underperform while the rest of the stack continues to expand.
Performance Track Record and Caveats
Despite its recent decline, the Roundhill ETF is performing very well. The Roundhill ETF might be down 20 % from its recent peak, but it’s still boasting a year‑to‑date gain of 40 % in 2026. The fund has now returned a whopping 220 % since it was established in May 2023, more than doubling the return of the Nasdaq‑100 over the same period. However, past performance isn’t always a reliable indicator of future results, and we can’t draw many conclusions from such a short track record. The resilience of this Roundhill ETF hasn’t been tested, as the AI industry has yet to hit a major speed bump despite recent volatility. Given its highly concentrated portfolio, I would expect the fund to suffer very steep losses if there is a prolonged downturn in AI stocks.
Risk Management, Cost, and Final Advice
As a result, investors should avoid putting all of their eggs in one basket. This ETF should only be added to a diversified portfolio of other funds and individual stocks that don’t already have a high degree of exposure to the technology sector. Finally, cost is another important consideration. The Roundhill ETF has an expense ratio of 0.75 %, meaning an investment of $10,000 would incur an annual fee of $75. That doesn’t sound like much, but it’s 25 times higher than what an investor would pay to own an index fund like the Vanguard S&P 500 ETF, which has an expense ratio of just 0.03%. This is a good argument for using a small position size. In sum, the Roundhill Generative AI and Technology ETF offers a compelling, actively managed way to capture AI’s long‑term upside—provided investors treat it as a satellite holding within a broader, balanced investment strategy.
https://www.fool.com/investing/2026/07/27/tech-sell-off-1-no-brainer-ai-etf-buy-85-long-term/