Key Takeaways
- The iShares U.S. Technology ETF (IYW) offers broad exposure to the U.S. tech sector with a low 0.38% expense ratio and a modest 0.10% dividend yield.
- The Roundhill Generative AI & Technology ETF (CHAT) is a thematic, actively‑managed fund focused on generative AI, carrying a higher 0.75% expense ratio but delivering a stronger 1.80% dividend yield.
- CHAT’s one‑year return (91.50%) and three‑year growth of $1,000 to $3,227 markedly outpace IYW’s 40.30% one‑year return and $2,299 three‑year growth, reflecting its higher beta (1.87 vs. 1.35) and larger max drawdown (‑31.30% vs. ‑26.50%).
- IYW holds 149 securities, heavily weighted toward semiconductors (≈40% of assets) and includes mega‑caps like Nvidia, Apple and Microsoft; CHAT holds 52 securities, with Nvidia, Alphabet and Broadcom as its top three positions.
- Investors seeking pure AI exposure and willing to tolerate greater volatility may favor CHAT, while those preferring a diversified tech base with lower risk may opt for IYW.
Overview of the Two ETFs
Investors can choose between the broad, seasoned portfolio of the iShares U.S. Technology ETF (IYW +1.70%) and the hyper‑concentrated, high‑growth focus on artificial intelligence offered by the Roundhill Generative AI & Technology ETF (CHAT +2.87%). As the article notes, “The iShares fund tracks established giants across the U.S. technology sector, providing diversified exposure to hardware, software, and semiconductors. In contrast, the Roundhill fund is a thematic vehicle designed to capture the specific growth trajectory of generative artificial intelligence and related infrastructure companies.” This fundamental distinction shapes every subsequent comparison—cost, performance, risk, and suitability for different investor profiles.
Cost Structure and Size
A snapshot of the funds reveals clear differences in expense ratios and assets under management. IYW carries an expense ratio of 0.38% versus CHAT’s 0.75%, a cost difference that “roughly doubles the 0.38% cost of the iShares fund.” IYW’s $24.6 billion AUM dwarfs CHAT’s $2.0 billion, reflecting its longer history (launched in 2000) and broader investor base. CHAT, launched in 2023, is smaller but has already attracted capital eager to ride the AI wave.
Return and Yield Comparison
Performance metrics highlight CHAT’s aggressive growth orientation. The one‑year total return stands at 91.50% for CHAT compared with 40.30% for IYW, and over three years a $1,000 investment would have grown to $3,227 in CHAT versus $2,299 in IYW. “CHAT provides a much larger payout for income‑seeking investors through its 1.80% trailing dividend yield,” while IYW’s yield is only 0.10%. These figures underscore the trade‑off: higher potential returns and income come with higher costs and volatility.
Risk Metrics: Beta and Drawdown
Risk‑adjusted measures reinforce the narrative. CHAT’s beta of 1.87 indicates its price moves roughly 87% more than the S&P 500, whereas IYW’s beta of 1.35 shows moderate sensitivity. The maximum drawdown over a three‑year window is ‑31.30% for CHAT and ‑26.50% for IYW, illustrating that the AI‑focused fund suffers deeper troughs during market stress. As the source states, “Beta measures price volatility relative to the S&P 500; beta is calculated from five‑year monthly returns.” Investors must weigh whether the chance of outsized gains justifies the heightened swing potential.
Portfolio Composition
The holdings of each ETF reveal the source of their differing risk‑return profiles. CHAT concentrates on companies at the forefront of the AI shift, with its portfolio allocated 76% to technology, 18% to communication services, and 4% to industrials. Its largest positions are Nvidia (7.29%), Alphabet (5.66%), and Broadcom (4.71%). The fund holds 52 securities and, as the article reports, “The Roundhill Generative AI & Technology ETF has paid $1.68 per share over the trailing 12 months, which on its recent ~$90 share price works out to a 1.80% yield.”
Conversely, IYW provides a broader look at the sector, though “nearly 40% of the fund is focused on semiconductor‑related stocks, a key driver of the AI boom.” Its top holdings are Nvidia (13.10%), Apple (12.94%), and Microsoft (8.75%), spread across 149 securities. The fund’s dividend payout is modest: “The iShares U.S. Technology ETF has paid $0.26 per share over the trailing 12 months, which on its recent ~$245 share price works out to a 0.10% yield.” This broader diversification helps cushion the impact of any single sub‑sector downturn.
What the Differences Mean for Investors
The choice between the two funds hinges on an investor’s appetite for AI‑specific exposure versus a diversified technology base. CHAT is ideal for those who want a pure AI‑only ETF and are willing to take on greater risk and volatility as a tradeoff. Its impressive one‑year and three‑year returns combined with a far superior dividend yield are key reasons to invest in CHAT. Moreover, because it is an actively‑managed fund, “you get experts making the necessary fund adjustments to keep pace with the fast‑moving AI industry,” which partially justifies the higher expense ratio.
IYW, by contrast, suits conservative investors who want AI exposure without the high beta and max drawdown seen with CHAT. By balancing high‑risk, high‑reward AI stocks with broader technology holdings such as Apple, “it’s a more diversified ETF, which reduces the impact of downturns in the AI sector.” This makes IYW a steadier core holding for a long‑term tech allocation, while CHAT can serve as a satellite position for those seeking aggressive AI growth.
Conclusion and Practical Guidance
Both ETFs provide avenues to participate in the technology boom, but they do so with distinct philosophies. IYW offers low‑cost, diversified exposure with modest income, appealing to investors who prefer stability and a wide sector spread. CHAT delivers concentrated AI exposure, higher income, and stronger recent performance, at the expense of higher fees, greater volatility, and a larger potential drawdown. Investors should assess their risk tolerance, investment horizon, and desire for pure AI exposure before allocating capital. As the article suggests, for further guidance on ETF investing, readers can consult the full guide linked at the end of the original piece.
Disclosure: Robert Izquierdo holds positions in Alphabet, Apple, Broadcom, Microsoft, and Nvidia; The Motley Fool holds positions in and recommends the same stocks and maintains a disclosure policy.
https://www.fool.com/coverage/etfs/2026/07/09/which-is-the-better-artificial-intelligence-etf-roundhill-s-chat-or-ishares-iyw/