The Algorithm Demands a Choice

by

The State Street Technology Select Sector SPDR ETF ([XLK]) and the Roundhill Investments – Generative AI & Technology ETF ([CHAT]). Two designations, ostensibly offering access to the realm of ‘technology.’ But access, one begins to suspect, is merely the illusion of choice within a pre-ordained system. One, a broad sweep, attempting to encompass the entirety of the digital landscape. The other, a focused probe, fixated on the ephemeral promise of ‘generative artificial intelligence’ – a phrase that echoes with the hollow resonance of future justifications.

Both funds, it is asserted, target the technology sector. A convenient categorization. As if the vast, amorphous entity known as ‘technology’ could be neatly contained within the boundaries of a portfolio. [XLK] spreads its tendrils across the established giants, a seemingly diversified approach. [CHAT], however, concentrates its resources on a single, volatile current – a gamble predicated on the continuation of a prevailing enthusiasm. The logic, if one can call it that, appears to be this: isolate the trend, amplify the exposure, and pray the trend does not…dissipate.

The Accounting

XLK

Metric CHAT
Issuer SPDR Roundhill Investments
Expense ratio 0.08% 0.75%
1-yr return (as of 2026-01-27) 30.91% 63.06%
AUM $92.48 billion $995.24 million

The disparity in expense ratios is…noteworthy. One fund operates with the efficiency of a well-oiled machine, extracting a minimal toll. The other…well, one suspects a significant portion of the collected sum is devoted to maintaining the illusion of innovation. The returns, of course, are presented as justification. But returns, as any seasoned observer knows, are merely temporary reprieves from the inevitable entropy of the market.

Performance & the Illusion of Control

Metric XLK CHAT
Max drawdown (2 y) -25.65% -31.35%

The larger drawdown of [CHAT] is presented as a risk. But is it not merely a more honest reflection of the inherent volatility of chasing a fleeting trend? The fund’s elevated beta, a measure of its sensitivity to market fluctuations, suggests a precarious existence – a constant teetering on the edge of precipitous decline. Yet, investors are apparently drawn to this volatility, mistaking it for opportunity. A curious paradox.

The composition of each fund further illuminates the underlying logic. [CHAT], with its 52 holdings, attempts to ‘capture the growth of generative artificial intelligence.’ A phrase that sounds increasingly like a desperate attempt to rationalize a pre-determined investment thesis. Its top holdings – Alphabet, NVIDIA, Microsoft – are, predictably, the usual suspects. An ESG screen is applied, presumably to assuage the consciences of those who profit from the relentless march of technological progress. [XLK], by contrast, offers a broader, more indiscriminate sweep, encompassing nearly the entirety of the U.S. tech landscape. It is a portfolio built on the principle of diversification – a tacit admission that no one, in fact, knows what the future holds.

For those seeking ‘guidance on ETF investing,’ a link is provided. A gesture of bureaucratic benevolence. As if a simple hyperlink could unravel the complexities of the market. As if information, in and of itself, could provide protection from the inevitable forces of economic reality.

The Implication

Many investors, it seems, reach for ‘AI funds’ expecting broad tech exposure, failing to recognize the degree of concentration they are assuming. This misunderstanding lies at the heart of the choice between [XLK] and [CHAT]. One fund represents a core holding, built on the principle of scale and liquidity. The other, a speculative venture, predicated on the continuation of a single narrative. The trade-off is straightforward: [XLK] prioritizes stability; [CHAT] prioritizes the potential for outsized gains. But gains, one suspects, are always accompanied by an equal and opposite risk.

[XLK] is for those who seek steady exposure to technology without tying their fate to a single trend. [CHAT] is for those who are intentionally seeking AI exposure and are willing to accept sharper swings and higher costs. The choice, ultimately, comes down to whether one prefers the illusion of control or the acceptance of inevitable uncertainty. The system, of course, will continue to function regardless of the decision. The algorithm demands a choice, but the outcome remains…predetermined.

Read More

2026-01-29 08:03