CHAT Takes a Big Swing on AI, While FTEC Provides Diversified Tech Exposure. Which Is the Stronger ETF Right Now?

The Fidelity MSCI Information Technology Index ETF (FTEC +0.07%) and the Roundhill Investments - Generative AI & Technology ETF (CHAT 1.25%) both invest primarily in technology, but their approaches differ.

FTEC tracks a cap-weighted tech index with nearly 300 holdings, while CHAT takes an active, concentrated approach to companies driving generative AI innovation.

This comparison highlights key differences in cost, returns, risk, and portfolio construction for investors considering a tech-focused ETF.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

CHAT comes with a much higher expense ratio, but also offers a higher recent yield. That fee gap may make a difference for cost-conscious investors, but the higher payout from CHAT could appeal to those seeking income.

Performance & risk comparison

What’s inside

CHAT is built for investors interested in generative artificial intelligence, with a heavy tilt toward technology (72% of assets), but also meaningful allocations to communication services (20%) and consumer cyclical (7%) sectors.

Its largest positions include Alphabet, Nvidia, and Microsoft. With just under three years of history, CHAT aims to capture innovation leaders beyond traditional tech giants.

FTEC, by contrast, is a broad technology ETF with just under 300 holdings, tracking the MSCI USA IMI Information Technology 25/50 Index. Its portfolio is dominated by Nvidia, Microsoft, and Apple, with a sector allocation almost entirely to technology (98%).

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What this means for investors

CHAT and FTEC differ primarily in their approaches to the technology industry. FTEC is far broader, encompassing the wider tech sector and focusing heavily on industry giants.

CHAT, on the other hand, leans into generative AI and other companies leading innovation in the tech space. It’s also an actively managed fund, in contrast to FTEC’s passively managed approach that follows its underlying index.

Because CHAT is actively managed, it charges a much higher management fee. Its expense ratio is nearly ten times that of FTEC, which could add up significantly for long-term investors and those with large account balances. That said, CHAT’s higher dividend yield could help offset some of those fees.

Another difference to consider between these two funds is their risk profiles. Because CHAT is a narrower fund that tilts toward AI stocks, it carries more risk. If the AI sector falters, this fund could struggle. But if it thrives, CHAT could be poised for lucrative returns.

It’s unclear exactly where the AI industry is going, so choosing between these ETFs will depend on your tolerance for risk. CHAT may be the best fit for investors willing to bet on generative AI, even if it results in greater volatility. If you prefer broader diversification, FTEC can help limit risk while still providing exposure to fast-growing tech stocks.