Compare Roundhill Generative AI & Technology ETF (NYSEMKT:CHAT) and iShares Semiconductor ETF (NASDAQ:SOXX) involves balancing a broad approach to artificial intelligence software and infrastructure against a focused bet on semiconductor hardware.
Both funds target the high-growth technological backbone of the modern economy, but pursue different strategic paths. While the iShares fund focuses exclusively on the physical hardware of the semiconductor industry, the Roundhill fund casts a wider net on the software, cloud services and interactive media companies that are driving the artificial intelligence boom.
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Snapshot (cost and size)
Beta measures price volatility relative to the S&P 500; Beta is calculated from five-year monthly returns. The 1-year yield represents the total return over the last 12 months. The dividend yield is the distribution yield over the last 12 months.
The iShares fund is more affordable for investors and has an expense ratio of 0.34% compared to 0.75% for the Roundhill ETF. However, CHAT offers a higher payout with a return gap of 1.6 percentage points.
Performance and risk comparison
What’s inside?
The Roundhill ETF provides exposure to 48 companies in the artificial intelligence ecosystem, spanning the technology (77%), communications services (17%) and consumer discretionary (6%) sectors. His biggest positions include Nvidia (NASDAQ:NVDA) at 6.98%, alphabet (NASDAQ:GOOGL) at 5.65% and Broadcom (NASDAQ:AVGO) at 4.39%. The fund uses proprietary research to manage its portfolio and assets under management (AUM). It was launched in 2023. CHAT has paid dividends of $1.68 per share over the last 12 months, which represents a yield of 1.80% on the current share price of ~$93.52.
SOXX is 100% focused on the technology sector. His biggest positions include Micron technology (NASDAQ:MU) at 8.17%, Advanced micro devices (NASDAQ:AMD) at 8.06% and Nvidia at 7.19%. The fund holds 30 securities and follows an index that uses market capitalization weighting with a capping method where the top five securities are capped at 8% each. It was launched in 2001. The ETF paid dividends of $1.47 per share over the last 12 months, which represents a yield of 0.20% on the current share price of approximately $599.70.
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What this means for investors
I think it’s worth pointing out that CHAT is an actively managed ETF and that’s likely responsible for its higher expense ratio. SOXX only tracks the NYSE Semiconductor Index.
I don’t find CHAT particularly appealing, but with SOXX the concentration risk is almost balanced. On the one hand, it only contains chip stocks. If things get tough for chipmakers, the impact will be enormous. Stocks in the same sector often move in unison; If Micron releases a disappointing quarterly report and shares fall, AMD is likely to fall as well.
However, the other part of this concentration risk is that the top 5 stocks must have a cap of 8% each. That sounds good in theory, but in the end 40% of the portfolio value could be based on just five names.
If your heart desires pure semiconductor use, SOXX is exactly the right thing for you. But it’s worth weighing up the risks first.
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Erin Kennedy does not hold a position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Micron Technology, Nvidia and iShares Semiconductor ETF. The Motley Fool has one Disclosure Policy.
SOXX vs. CHAT ETF: Semiconductor Chips Beat AI Software was originally published by The Motley Fool
https://finance.yahoo.com/markets/stocks/articles/soxx-vs-chat-etf-semiconductor-133501155.html
