Which Is the Better Artificial Intelligence ETF, Roundhill’s CHAT or Vanguard’s VGT?

The Roundhill Generative AI & Technology ETF (CHAT -0.10%) offers thematic exposure to the artificial intelligence ecosystem, while the Vanguard Information Technology ETF (VGT -0.35%) provides broad-based technology sector coverage with much lower costs.

Investors looking for tech exposure may find these two funds have very different risk profiles. While the Roundhill fund targets a specific technological shift, the Vanguard fund follows a broad index of established tech giants, providing a diversified foundation for a growth-oriented portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Cost is a major differentiator here, as the Vanguard fund is 66 basis points more affordable than its competitor. Additionally, there is a notable yield gap, as the Roundhill fund currently offers a higher payout to its shareholders.

Performance & risk comparison

What’s inside

The Vanguard Information Technology ETF focuses on a broad range of electronics and computer-related companies, with 99% of its assets concentrated in the technology sector. Its largest positions include Nvidia (NVDA -0.06%) at 16.10%, Apple (AAPL +0.22%) at 14.33%, and Microsoft (MSFT -0.30%) at 8.28%. The fund holds 310 stocks in total. It was launched in 2004. The Vanguard Information Technology ETF has paid $0.43 per share over the trailing 12 months, which on its recent ~$122.99 share price works out to a 0.4% yield.

The Roundhill Generative AI & Technology ETF takes a more specialized approach, focusing on the artificial intelligence landscape with 77% in technology and 17% in communication services. Top holdings include Nvidia at 6.43%, Alphabet (GOOGL -0.13%) at 5.13%, and Broadcom (AVGO -5.94%) at 4.12%. It maintains a tighter portfolio of 52 holdings and has seen higher assets under management (AUM) growth recently. It was launched in 2023. The Roundhill Generative AI & Technology ETF has paid $1.68 per share over the trailing 12 months, which on its recent ~$93.61 share price works out to a 1.8% yield.

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Which looks like the better buy

Those seeking to invest in the hot field of artificial intelligence have two distinct choices in the Vanguard Information Technology ETF (VGT) and the Roundhill Generative AI & Technology ETF (CHAT). Choosing between them depends on a few key considerations.

CHAT strictly targets the AI sector, which limits its holdings to just 52 companies. This focus allowed it to deliver incredible returns, and its higher dividend yield only adds to this. The ETF is far more expensive than VGT because it’s an actively managed fund. This is an important factor, since active management allows CHAT to quickly adjust to the rapidly evolving AI industry. Its small set of holdings around a single industry create high volatility, as demonstrated by its larger max drawdown and beta, making fund performance susceptible to an AI sector downturn.

VGT gives you exposure to AI stocks, as many of the biggest names in the technology industry are AI leaders, such as Nvidia and Microsoft. Since it includes holdings across the broader tech sector, VGT is more diversified, providing some stability against a downturn in the AI market. It offers high liquidity through a massive AUM, and because it’s a passively managed fund, its expense ratio is low. However, it doesn’t provide the level of return seen with CHAT.

Ultimately, picking between VGT and CHAT comes down to your risk tolerance. If you prioritize high returns and are OK with greater volatility, CHAT is the superior choice. For conservative investors, VGT may be the better ETF.