In a recent “ETF Edge” segment, Roundhill CEO discussed the performance of the “Magnificent Seven” tech stocks and the importance of active management in thematic investing, particularly for their AI ETF, CHAT, which includes major companies like NVIDIA and Microsoft. He also highlighted the promising growth potential of the GLP-1 weight loss ETF, which focuses on companies in the obesity treatment sector, emphasizing the need for strategic selection in these emerging markets.
In a recent segment of “ETF Edge,” Roundhill CEO discussed the current landscape of technology ETFs, particularly focusing on the performance of the “Magnificent Seven” tech stocks, which include major players like NVIDIA. Despite a strong performance earlier in the year, with NVIDIA up 33% and even 50% in July, there has been a noticeable stall in inflows into big-cap tech. The CEO suggested that this fluctuation reflects a two-way market, indicating that investor interest is still present, albeit with varying levels of inflow and outflow.
The conversation shifted to Roundhill’s AI ETF, symbolized as CHAT, which was launched over a year ago and includes prominent companies such as NVIDIA, Microsoft, and Alphabet. Although the ETF has performed in line with the broader tech sector, the CEO acknowledged the challenge of identifying companies that will genuinely benefit from AI beyond the obvious choices. He emphasized the importance of active management in thematic investing, particularly in assessing companies’ actual engagement with AI through their earnings reports and transcripts.
The CEO highlighted the need for a more nuanced approach to selecting AI-focused companies, pointing out that not all firms that mention AI in their reports are necessarily leaders in the space. For instance, while Intel has been vocal about AI, its stock performance has not reflected that enthusiasm, leading to a lower weighting in the CHAT portfolio. This underscores the significance of thorough research and active management in thematic ETFs to ensure that investors are backing companies with real potential in the AI sector.
Another thematic ETF discussed was the GLP-1 weight loss ETF, which includes 20 companies, with a significant portion allocated to Novo Nordisk and Lilly. Since its debut in May, the ETF has seen a 10% increase, and the CEO expressed optimism about the future of the weight loss market, projected to reach a total addressable market of $130 billion. He noted that these healthcare companies are performing similarly to tech stocks, reflecting the growing interest and investment in the obesity and diabetes treatment sectors.
The CEO concluded by mentioning the potential for further growth in the GLP-1 space, particularly as the market evolves beyond injectable treatments. Companies like Viking are exploring innovative non-injectable therapies, which could provide additional investment opportunities. Overall, the discussion highlighted the dynamic nature of thematic ETFs and the importance of strategic selection and active management in navigating these emerging markets.