this S&P 500 Index In 2023 and 2024, it achieved annual total returns of over 25% for two consecutive years. The only other time in the index's history (dating back to 1957) that this has happened was during the dot-com boom of 1997 and 1998.
Technology stocks also drove the S&P higher that time, but this time the catalyst was artificial intelligence (AI). Some of the world's largest companies are leading the charge. NVIDIA For example, the company's stock price has surged more than 840% since the start of 2023, taking the company's value to $3.4 trillion as of this writing.
But the dot-com bubble taught investors that picking winners and losers in emerging industries can be extremely difficult. That era produced incredible success stories such as Amazonbut Thousands Other companies failed. In the long term, the AI boom may have similar results.
That's why buying an exchange-traded fund (ETF) that holds a portfolio of AI stocks may be the smartest way to participate in this technological revolution. Investors can buy individual shares of the company Roundhill Generative Artificial Intelligence and Technology ETF (NYSE:CHAT) Less than $50. Here's why it's worth considering.
ETFs can hold hundreds or even thousands of individual stocks, but the Roundhill ETF only holds 50. This means it is relatively concentrated, which can lead to volatility, so it is primarily suitable for investors or stocks that already own other ETFs and/or diversified portfolios.
The Roundhill ETF invests exclusively in companies developing the platforms, infrastructure and software that make artificial intelligence a reality. Since this technology is still in its early stages, the list of names for these categories is not very long yet.
That being said, the ETF's top five holdings include a star-studded cast of AI leaders:
| in stock | RoundHill ETF Portfolio Weights |
|---|---|
| 1. NVIDIA | 7.32% |
| 2. letter | 5.67% |
| 3. Microsoft | 5.18% |
| 4. meta platform | 4.22% |
| 5. TSMC | 3.65% |
Data source: Roundhill Investments. Portfolio weightings are accurate as of January 16, 2025 and are subject to change.
Nvidia is a top supplier of graphics processing units (GPUs) for artificial intelligence data centers. Those chips have driven its growth over the past few years and will continue to do so, but the company is now eyeing new multi-trillion-dollar opportunities in areas like self-driving cars and robotics. Therefore, this stock deserves to be at the top of the Roundhill ETF.
Alphabet and Microsoft are also major players in artificial intelligence, developing their own chatbots and virtual assistants. Their cloud platform also offers state-of-the-art computing power (powered by Nvidia chips) and off-the-shelf large language models (LLMs) that enterprises can rent to develop their own AI applications.
In addition to the Roundhill ETF's top five holdings, it holds several other leading AI stocks, such as Broadcom, Oracle, Palantir TechnologyAmazon and AMD.
The Roundhill ETF was established in May 2023, so it doesn't have a long track record for investors to analyze. However, it would return 31% in 2024, handily beating the S&P 500 (even accounting for the ETF's 0.75% expense ratio). The strong performance was partly due to an average gain of 74% among the ETF's top five holdings:
As I mentioned before, this ETF is too concentrated to be a complete portfolio on its own, and investors should always avoid putting all their eggs in one basket. But it could help boost returns in a diversified portfolio, especially if AI stocks continue to lead the market higher.
If you invested $10,000 in the S&P 500 at the beginning of 2024, your investment at the end of the year would be $12,502 (including dividends). But if you split that investment 70% in the S&P 500 and 30% in the Roundhill ETF, your $10,000 would be worth $12,680.
In the short term, that doesn't sound like a huge difference, but in the long term, the magic of compound interest could lead to significant outperformance. Of course, AI must live up to the high expectations for ETFs in order to continue generating market-beating returns.
Quote predictions from Goldman SachsRoundhill believes that artificial intelligence will bring up to $7 trillion in revenue to the global economy by 2032. Hardware vendors such as Nvidia, TSMC and Broadcom will benefit from this, as it would be impossible to develop AI without their chips and components. But a lot of the value will also come from the software side, thanks to companies like Microsoft, Alphabet, Amazon, Palantir and others.
So for investors who haven't yet been exposed to the AI revolution, the Roundhill ETF looks like a no-brainer.
Before buying shares of Tidal Trust II - Roundhill Generative Ai & Technology ETF, consider the following factors:
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Randi Zuckerberg is the former director of market development and spokesperson for Facebook, the sister of Meta Platforms CEO Mark Zuckerberg, and a board member of The Motley Fool. John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool. Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Alphabet, Amazon, Goldman Sachs Group Inc., Meta Platforms, Microsoft, Nvidia, Oracle, Palantir Technologies and TSMC. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 Microsoft calls and short January 2026 $405 Microsoft calls. The Motley Fool has a disclosure policy.
1 No-brainer Artificial Intelligence (AI) ETF to Buy for $50 During the S&P 500 Bull Market Originally published by The Motley Fool