XLK vs. CHAT: Two ETF Paths to AI Exposure
AI is reshaping tech, and capital is chasing it. If you want clean exposure through ETFs, two options stand out: the Technology Select Sector SPDR Fund (XLK) and the Roundhill Generative AI & Technology ETF (CHAT). Same theme, very different vehicles.
At a glance: cost and size
- Issuer: Roundhill Investments (CHAT) vs. SPDR (XLK)
- Expense ratio: 0.75% (CHAT) vs. 0.08% (XLK)
- 1-year return (as of Oct. 27, 2025): 72.10% (CHAT) vs. 31.77% (XLK)
- Beta: 1.65 (CHAT) vs. 1.23 (XLK). Beta uses daily returns vs. the S&P 500.
- AUM: $1.1B (CHAT) vs. $98.24B (XLK)
Translation: XLK is cheaper, larger, and typically trades tighter. CHAT charges more, runs hotter, and targets a narrower slice of AI.
Performance and risk
- Max drawdown (5y): (31.34%) for CHAT vs. (27.73%) for XLK
- Growth of $1,000 over 5 years: $2,587 (CHAT) vs. $2,822 (XLK)
Short-term heat favored CHAT over the last year. Across five years, XLK compounded more with slightly smaller drawdowns. Note: CHAT launched in 2023, so long-horizon metrics should be viewed with context.
What's inside
XLK tracks the Technology Select Sector Index from the S&P 500. It holds 71 names with a 26.9-year record. Top positions: Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL). Breadth and liquidity are strengths.
CHAT is actively managed and concentrates on generative AI. It holds 45 names with an ESG screen. Top positions: Nvidia (NVDA), Alphabet (GOOGL), Oracle (ORCL). Expect higher sector concentration and more volatility.
How to choose (decision framework)
- Cost sensitivity: If fee drag matters, XLK's 0.08% is tough to beat.
- Exposure style: Want broad tech beta with AI leaders embedded? Choose XLK. Want a sharper bet on generative AI? Consider CHAT.
- Risk tolerance: CHAT's beta (1.65) and narrower focus mean bigger swings. XLK is calmer and deeper.
- Portfolio role: XLK works as a core tech sleeve. CHAT fits as a satellite position around your core.
- Overlap check: Both lean into Nvidia. Watch single-name concentration across your full book.
- Liquidity needs: XLK's scale and spreads favor tacticians and larger tickets. CHAT is fine, but size your orders.
Practical notes for finance teams
- Tracking difference: Verify realized costs vs. stated fees.
- Execution: For CHAT, use limit orders; check creation/redemption health. For XLK, market depth is widely available.
- Risk controls: Stress test for AI semiconductor shocks and rates moves. Monitor active bets in CHAT against your house view.
- Review cadence: Reassess CHAT's active edge and fee every 6-12 months. For XLK, monitor index changes and top-weight caps.
Bottom line
If you want broad tech exposure with embedded AI leaders at minimal cost, XLK is the straightforward pick. If you're comfortable paying up for active selection and higher volatility to target generative AI, CHAT can make sense as a higher-octane sleeve.
Glossary
- ETF: Exchange-traded fund that holds a basket of securities.
- Expense ratio: Annual fund fee as a percentage of assets.
- Actively managed fund: Managers select holdings; no fixed index to track.
- Index: A benchmark of securities used to measure a market or sector.
- Beta: Volatility vs. the S&P 500; above 1.0 implies bigger swings.
- AUM: Assets under management.
- Max drawdown: Largest peak-to-trough decline over a period.
- Sector concentration: Heavy exposure to one industry or theme.
- ESG screen: Filters based on environmental, social, and governance criteria.
- Liquidity: How easily you can trade without moving price.
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