Can This AI ETF Turn $10,000 Into $1 Million?

The promise of quick riches in the stock market is alluring, especially with artificial intelligence stocks soaring. But can you realistically turn a modest investment into a fortune using an AI-focused exchange-traded fund?

AI Stocks' Explosive Growth

Several companies involved in artificial intelligence have seen massive gains. Palantir and Nvidia have led the charge, alongside cloud providers like Nebius Group and CoreWeave.

A well-timed $10,000 investment in these companies could have set you on the path to a million-dollar portfolio. Identifying the next big winner is incredibly challenging.

Roundhill's AI ETF: A Diversified Approach

For those seeking broad exposure to artificial intelligence, the Roundhill Generative AI & Technology ETF (CHAT) is an option. It offers a diversified approach rather than picking individual stocks.

The ETF focuses on companies that are actively developing generative AI, providing infrastructure, or commercializing AI applications. Investors can easily see the fund's complete holdings.

Top Holdings and Performance

The ETF's largest holdings include major players, such as Arm. The fund holds 40 stocks and some currency hedges, providing diversification.

Since its inception in 2023, the Roundhill Generative AI & Technology ETF has delivered a 148% return. This is compared to the S&P 500's 66% total return, even after factoring in a 0.75% expense ratio.

The Million-Dollar Question

To turn $10,000 into $1 million, the ETF would need to increase 100-fold. This may be difficult, considering the current size of its top holdings.

Nearly one-third of the portfolio is invested in companies with market capitalizations exceeding $1 trillion. Growth becomes more challenging for these giants.

Valuation Concerns

Many stocks within the portfolio have high valuations. Palantir, Nebius, and Coreweave carry significant premiums.

That said, some of the best performers of the last few years also looked expensive a few years ago. The expected return of stocks with such high valuations isn't going to be as high as those offering more compelling values.

Realistic Expectations

It seems unlikely the Roundhill Generative AI & Technology ETF will produce returns strong enough to turn $10,000 into $1 million over a reasonable time frame. Still, that doesn't mean that it's not worth owning.

For investors seeking exposure to the generative artificial intelligence trend without betting on one or two stocks, this ETF offers a simple solution.