When exploring investment opportunities in artificial intelligence, two prominent exchange-traded funds (ETFs) come to the forefront: the Technology Select Sector SPDR Fund (XLK) and the Roundhill Generative AI & Technology ETF (CHAT). Both funds provide exposure to AI-related stocks but differ significantly in their management styles, expense ratios, and focus on the technology sector.
Overview of Each ETF
Technology Select Sector SPDR Fund (XLK)
Launched in 1998, the Technology Select Sector SPDR Fund aims to offer investors broad exposure to the technology segment of the S&P 500. It tracks the Technology Select Sector Index, representing a diverse array of technology stocks.
- Expense Ratio: 0.08%
- AUM (Assets Under Management): approximately $98.24 billion.
- Number of Holdings: 71 stocks, including major players like Nvidia, Microsoft, and Apple.
- Performance: As of October 27, 2025, the ETF has gained 31.77% over the past year.
With a long track record of 26.9 years, XLK provides cost-effective, diversified exposure to established tech companies, which is appealing for risk-averse investors.
Roundhill Generative AI & Technology ETF (CHAT)
In contrast, the Roundhill Generative AI & Technology ETF is a newer entrant, having launched in 2023, primarily in response to the rapid advancements in technology, especially generative AI.
- Expense Ratio: 0.75%
- AUM: around $1.1 billion.
- Number of Holdings: 45 stocks, with a strong focus on generative AI companies such as Nvidia, Alphabet, and Oracle.
- Performance: Impressively, CHAT reported a one-year return of 72.10%, significantly higher than XLK.
As an actively managed fund, CHAT targets investments in companies that are pivotal in generative AI, which adds a layer of volatility and potential for higher returns.
Key Metrics Comparison
| Metric | CHAT (Roundhill) | XLK (SPDR) |
|---|---|---|
| Expense Ratio | 0.75% | 0.08% |
| 1-Year Return (as of 10/27/25) | 72.10% | 31.77% |
| Assets Under Management | $1.1 billion | $98.24 billion |
| Number of Holdings | 45 | 71 |
| Beta | 1.65 | 1.23 |
| Max Drawdown (5 years) | 31.34% | 27.73% |
Risk and Performance
The beta values of the two ETFs reflect their volatility relative to the S&P 500. CHAT has a higher beta of 1.65, suggesting greater price fluctuations and risk, while XLK, with a beta of 1.23, indicates more stable performance relative to the market.
In terms of drawdown, XLK has faced lower maximum drawdowns over five years at 27.73% compared to CHAT’s 31.34%. This lower drawdown can be appealing to risk-averse investors who prefer stability over the potential for higher returns.
Holdings Breakdown
One of the strengths of XLK is its exposure to a wide range of technology sectors, providing a diversified portfolio. Its top holdings include:
- Nvidia (NVDA)
- Microsoft (MSFT)
- Apple (AAPL)
Conversely, CHAT zeroes in on generative AI, which is currently a hot topic in technology investing. Its largest positions also feature Nvidia and Alphabet, alongside Oracle. However, with only 45 holdings, CHAT concentrates more heavily in its targeted sector, which can lead to significant returns or increased risk.
Investing Considerations
Cost Efficiency: One crucial consideration is the expense ratio. XLK’s 0.08% fee is substantially lower than CHAT’s 0.75%. Lower fees can significantly enhance long-term returns, especially for passive investors.
Management Style: XLK is index-based, providing a more passive investment approach with its diversified holdings. On the other hand, CHAT’s active management seeks to capitalize on emerging trends in generative AI, possibly leading to higher returns, but with increased risks.
Performance Trends: While both funds have shown promising growth, CHAT’s rapid ascent can be tempting for investors seeking high returns in the fast-evolving AI sector. However, its lack of long-term performance history necessitates caution.
Conclusion
Choosing between the Technology Select Sector SPDR Fund and the Roundhill Generative AI & Technology ETF ultimately hinges on individual investor goals and risk tolerance.
Technology Select Sector SPDR Fund: A great option for those seeking diversified exposure to the broader technology sector at a low cost, ideal for conservative investors looking for stability and steady growth.
- Roundhill Generative AI & Technology ETF: Better suited for investors willing to take on more risk for potentially higher rewards. Its focus on generative AI provides a concentrated portfolio that could benefit from significant market trends.
In the end, navigating the world of AI investments requires understanding both the sector’s volatility and the compelling potential of AI technologies. Careful consideration of expense ratios, management styles, and investment timelines can guide you toward making an informed decision tailored to your investment strategy.
