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The Nasdaq-100 index recently entered a new bull market after briefly slipping into bear territory in April.
Artificial intelligence (AI) stocks like Nvidia are leading the index higher, so investors who don't own them might be underperforming the broader market.
The Roundhill Generative AI and Technology ETF offers investors a simple way to own a basket of the world's best AI stocks.
The Nasdaq-100 recently shook off a very short-lived trip into bear territory, which occurred after President Trump announced his "Liberation Day" tariffs in April. The index set a fresh record high in June, which marked the official beginning of a new bull market.
The Nasdaq-100 is home to many of the tech giants that are leading the artificial intelligence (AI) revolution. Now that investors feel confident that a global trade war will be averted, they are piling back into these AI powerhouses that continue to generate incredible revenue and earnings growth.
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Investors who haven't owned a slice of the AI industry over the last couple of years have probably underperformed the broader market, but it isn't too late. The Roundhill Generative AI and Technology ETF (NYSEMKT: CHAT) is an exchange-traded fund (ETF) that holds 40 leading AI stocks, and it could be a great addition to any diversified portfolio. The best part is that a single share will cost investors under $60.
Image source: Getty Images.
The Roundhill ETF invests exclusively in the companies developing the infrastructure, platforms, and software powering the AI revolution. Despite holding 40 different stocks, the ETF is quite top-heavy, with its five largest positions accounting for 25.7% of the total value of its portfolio, and they are among the leaders in those three AI segments:
Outside of its top five positions, the Roundhill ETF holds a number of other top AI stocks, including Palantir Technologies, Amazon, Broadcom, Advanced Micro Devices, and Apple.
Investors shouldn't bet the farm on the Roundhill ETF because it's so concentrated, and if the AI boom falters, it could result in some steep losses. It's smarter to add it to a diversified portfolio of other ETFs and individual stocks instead.
The Roundhill ETF was only established in May 2023, so it doesn't have a very long track record for investors to analyze. However, it has delivered an incredible gain of 115% since then, trouncing the S&P 500, which is up by 56% over the same period, and the Nasdaq-100, which has returned 71%. Therefore, it could supercharge a portfolio that doesn't already have a high degree of exposure to the AI boom.
The Roundhill ETF is actively managed, which means a team of professionals regularly buys and sells stocks based on what they think will deliver the best returns. That comes with added costs, which is why the fund has a relatively high expense ratio of 0.75%. Many passive index funds issued by Vanguard have expense ratios as low as 0.03%, so an investment of $100,000 in one of those would incur an annual fee of just $30, compared to $750 for the Roundhill ETF.
This isn't an issue at the moment because the ETF's incredible performance is more than offsetting its costs, but it's something to keep in mind for the long term, especially if its returns start to slip. For now, this ETF looks like a great buy for investors who want to own a slice of the AI revolution.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, and Palantir Technologies. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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