CHAT vs. XLK: Leaning Into AI’s Next Phase or Anchoring in Mega-Cap Tech | The Motley Fool

The Roundhill Investments - Generative AI & Technology ETF (CHAT) stands out for its active focus on generative artificial intelligence, while the State Street Technology Select Sector SPDR ETF (XLK) offers broad, index-based exposure to the U.S. technology sector at a much lower cost. Both CHAT and XLK target technology trends, but take very different approaches: CHAT is actively managed with a focus on companies advancing generative AI, and XLK tracks the S&P 500’s technology sector. Investors comparing these funds may want to weigh cost, sector purity, and recent performance. Snapshot (cost & size) Metric CHAT XLK Issuer Roundhill Investments SPDR Expense ratio 0.75% 0.08% 1-yr return (as of 2025-12-18) 44.6% 21.9% Beta 1.70 1.26 AUM 1 billion $93.46 billion Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months. XLK is far more affordable with a 0.08% expense ratio, while CHAT’s active strategy comes at a higher 0.75% fee. XLK’s massive assets under management (AUM) also support deeper liquidity and tighter trading spreads. Performance & risk comparison Metric CHAT XLK Max drawdown (5 y) -31.34% -33.56% Growth of $1,000 over 5 years $2,243 $2,207 What's inside XLK holds about 70 companies and aims for comprehensive coverage of the S&P 500’s technology sector, with 99% of assets in tech and negligible exposure elsewhere. Its top positions- Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT)-dominate the portfolio, reflecting the sector’s concentration. With a 27-year track record, XLK is among the most established tech ETFs and avoids sector or ESG overlays. By contrast, CHAT is a much newer, actively managed fund investing in 52 stocks across technology (83%), communication services (11%), and consumer cyclicals (6%). Its largest holdings include Alphabet (NASDAQ: GOOGL), Nvidia, and Microsoft. CHAT’s ESG screen may appeal to those seeking responsible investing within the generative AI theme, but it results in less sector purity compared to XLK. For more guidance on ETF investing, check out the full guide at this link . What this means for investors The comparison between CHAT and XLK highlights two very different approaches to artificial intelligence exposure. XLK mirrors the technology sector inside the S&P 500, tying results to the largest and most established companies in the market. CHAT takes an active approach, concentrating on firms more directly involved in generative AI development and adoption. That design leaves CHAT more exposed to how quickly AI spending translates into durable business results. The contrast shows up in how each fund generates returns. XLK’s performance is driven by a small group of mega-cap leaders whose earnings already account for a large share of index returns. CHAT holds several of those same companies, but it also reaches beyond traditional technology into adjacent areas where AI adoption is still taking shape. That flexibility introduces more variability. It also increases dependence on manager judgment and raises the bar for justifying higher fees. For investors, the decision is about portfolio structure...

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