The S&P 500 has delivered back-to-back annual total returns of over 25% in 2023 and 2024, a performance unmatched since 1997 and 1998 during the height of the dot-com internet boom. This remarkable growth is largely driven by the technology sector, with artificial intelligence (AI) emerging as the main catalyst behind the surge in stock prices. As AI continues to revolutionize industries, investors are looking for ways to capitalize on this technological breakthrough. One of the best ways to invest in AI is by buying an exchange-traded fund (ETF) like the Roundhill Generative AI and Technology ETF (CHAT), which offers exposure to some of the biggest AI leaders.
S&P 500’s Impressive Back-to-Back Performance
In recent years, the S&P 500 has defied expectations, delivering impressive returns in consecutive years. In 2023 and 2024, the index posted annual total returns of over 25%, a feat previously only achieved during the dot-com boom in the late 1990s. This period of growth was also driven by the technology sector, but this time, the driving force behind the rally is artificial intelligence.
The technology industry, particularly AI, is becoming a game-changer for many companies. As AI rapidly advances, it is disrupting a wide range of industries, from autonomous vehicles and robotics to data centers and software. Companies at the forefront of this technological revolution are seeing their stock prices soar, with Nvidia leading the charge.
Nvidia’s Soaring Stock Price
Nvidia, a major player in the AI sector, has experienced a staggering rise in stock value. Since the beginning of 2023, Nvidia’s stock has surged by over 840%, pushing its market capitalization to $3.4 trillion as of early 2025. The company’s success is largely due to its dominance in the graphics processing unit (GPU) market, which is essential for powering AI data centers.
Nvidia’s GPUs are at the heart of many AI systems, enabling them to process vast amounts of data and perform complex tasks at unprecedented speeds. As AI adoption grows, Nvidia is well-positioned to continue reaping the benefits of this rapidly expanding market. However, as the dot-com era taught investors, not all companies in an emerging industry will succeed. Some will thrive, while others may fail to capitalize on the opportunities presented by AI.
The Challenges of Picking Winners in AI
The dot-com bubble of the late 1990s and early 2000s serves as a cautionary tale for investors today. During that time, countless internet companies soared to unimaginable valuations, only to collapse when the bubble burst. However, some companies, like Amazon, managed to survive and thrive, becoming dominant players in their respective industries. The challenge for investors during the AI boom is identifying which companies will become the next Amazon and which ones will fade into obscurity.
Given the volatility and uncertainty surrounding the AI sector, it can be difficult for individual investors to pick winners and losers. The emerging AI industry is still in its early stages, and predicting which companies will emerge as market leaders is no easy task. This is where an AI-focused ETF, like the Roundhill Generative AI and Technology ETF, can offer a safer and more diversified way to invest in this rapidly growing market.
Why the Roundhill Generative AI and Technology ETF (CHAT) is Worth Considering
The Roundhill Generative AI and Technology ETF (CHAT) is designed to provide investors with exposure to companies developing AI platforms, infrastructure, and software. Unlike some other ETFs that hold hundreds or thousands of stocks, the Roundhill ETF is relatively concentrated, holding only 50 stocks. This concentrated portfolio means that the ETF is more volatile than broader ETFs, so it’s better suited for investors who already have a diversified portfolio of other ETFs and stocks.
The Roundhill ETF focuses on the AI sector, investing in companies that are working to bring AI to life. These companies are involved in everything from hardware and software development to the infrastructure needed to support AI applications. The ETF’s relatively small number of holdings means it is highly selective in choosing which companies to include. As of January 16, 2025, the top five holdings in the Roundhill ETF are:
- Nvidia (7.32%)
- Alphabet (5.67%)
- Microsoft (5.18%)
- Meta Platforms (4.22%)
- Taiwan Semiconductor Manufacturing (3.65%)
Nvidia’s Dominance in the AI Sector
As the top holding in the Roundhill ETF, Nvidia’s position reflects its dominance in the AI space. Nvidia is the leading supplier of GPUs for AI data centers, and its chips are a critical component in many AI applications. The company has established itself as a key player in AI development, and its products are integral to the growth of AI across various industries.
In addition to its success in AI data centers, Nvidia is also eyeing new multitrillion-dollar opportunities in emerging sectors like autonomous vehicles and robotics. These industries are expected to grow exponentially over the next decade, and Nvidia is well-positioned to capture a significant share of these markets. Given its role as a leader in AI, Nvidia is expected to remain a top performer in the Roundhill ETF.
Exposure to Other AI Leaders
In addition to Nvidia, the Roundhill ETF includes other major players in the AI industry, such as Alphabet, Microsoft, and Meta Platforms. These companies are all heavily involved in AI research and development, and they are well-positioned to benefit from the growing demand for AI technologies.
- Alphabet (the parent company of Google) is making significant strides in AI, particularly in areas like machine learning, natural language processing, and autonomous vehicles.
- Microsoft is leveraging AI to enhance its cloud computing offerings and improve its software products, such as Microsoft Office and Azure.
- Meta Platforms (formerly Facebook) is investing heavily in AI and machine learning to improve its social media platforms and drive the development of the metaverse.
The Bottom Line: Why Invest in AI ETFs?
Investing in the AI sector can be highly rewarding, but it also comes with risks. Picking individual stocks in such a rapidly evolving industry can be challenging, especially when some companies will inevitably fail to deliver on their promises. The Roundhill Generative AI and Technology ETF offers a safer and more diversified way to invest in the AI revolution, providing exposure to leading companies in the AI space, including Nvidia, Alphabet, Microsoft, and Meta.
With AI set to drive massive growth in the coming years, investing in an ETF like Roundhill CHAT could be a smart move for investors looking to capitalize on the tech revolution without having to pick individual winners and losers. As always, it’s important to carefully consider your investment strategy and risk tolerance before diving into any new sector.
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