The Ultimate Artificial Intelligence ETF to Buy With $50 Right Now

Exchange-traded funds (ETFs) can hold many individual stocks, often tens or even hundreds. Some ETFs are designed to closely follow major market indexes like the S&P 500 (^GSPC), while others provide targeted exposure to specific industries such as artificial intelligence (AI).

The Roundhill Generative AI and Technology ETF (CHAT) focuses on a select group of companies that are crucial in developing AI technology. With a share price under $50, it appears to be an excellent option for investors looking to enhance their portfolios with AI exposure.

Top Companies in the ETF

This ETF contains 52 stocks and is actively managed. Roundhill’s expert team picks stocks based on their potential for growth and their significance in the AI space.

This specialized ETF has an expense ratio of 0.75%. This is the cost deducted annually for management expenses, making it higher than more passive funds like the Vanguard S&P 500 ETF, which has a much lower expense ratio of 0.03%. While the management cost is something investors should consider, they benefit from having a focused portfolio without having to perform extensive research to build it themselves.

The ETF’s top five holdings, representing 26% of its total portfolio value, feature leading names in AI:

Stock	Portfolio Weight
1. Nvidia	7.32%
2. Alphabet	5.24%
3. Microsoft	4.94%
4. Meta Platforms	4.68%
5. Palantir Technologies	3.86%

The data shows that Nvidia is at the forefront of supplying advanced graphics processing units (GPUs) that are essential for AI development. Its latest GPU models have been in high demand, and the company plans to expand into areas like autonomous vehicles.

Alphabet and Microsoft are also key players. Both companies offer AI chatbot services aimed at competing with popular applications like OpenAI's ChatGPT. They operate leading cloud platforms that provide essential services for AI software development.

Meta Platforms has launched its own AI tools integrated within its social media apps. Meanwhile, Palantir has seen remarkable success with its AI-driven software, leading to a significant stock increase in recent times.

Beyond these top five, the ETF includes other noteworthy companies such as Oracle, Broadcom, Apple, and Amazon.

Potential for Strong Returns

Since its creation in May 2023, the Roundhill ETF has shown promising performance, achieving a return of 30.9% in 2024. This was notably better than the S&P 500's return of 23.3% for the same period. Much of this success was attributed to its leading five holdings, which saw an impressive average return of around 125%.

If the top AI companies continue to grow, this ETF may perform very well in the future. Roundhill projects that AI will add around $7 trillion to the economy by 2032, providing enormous growth opportunities for key players in the ETF.

That said, it's wise for investors to avoid placing all their assets in a single ETF. Diversifying one’s investments in multiple funds or stocks can mitigate the risk of losing significant capital if the AI industry doesn't meet high expectations.

For example, had an investor allocated $50,000 into the S&P 500 at the beginning of 2024, they would have seen that investment grow to approximately $61,650 by year-end without considering dividends. However, if they allocated 70% into the S&P 500 and 30% into the Roundhill ETF, their investment would have increased to around $62,790. That difference may seem minor initially, but the impact becomes significant over a decade due to compounding.

While no investment is without risk, the AI industry is likely to have a transformative impact, making the Roundhill ETF a simple yet effective way for investors to tap into this growth potential.

AI, ETF, Investing