The rapid growth in demand for memory and storage capacity in data centers is reshaping the landscape on Wall Street. While chipmakers and hyperscalers were hot investing plays during earlier phases of the artificial intelligence infrastructure build-out, now there’s much more interest in memory makers such as Micron Technology, Sandisk, and SK Hynix.
Pure-play AI memory stock exchange-traded funds are also popping up. A popular one is the RoundhillMemoryETF(NYSEMKT: DRAM), which was launched on April 2, and marketed as the first-ever memory stock ETF.
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The Roundhill Memory ETF may provide exposure to some of the best-known AI memory companies, but I prefer another option, even though it’s not a pure play on that niche: the Invesco Dorsey Wright Technology Momentum ETF (NASDAQ: PTF).
Why the Invesco Dorsey Wright Technology Momentum ETF is a better choice
I have one major concern about the Roundhill Memory ETF. With only 17 stocks in its portfolio, it lacks the diversification that I like in an exchange-traded fund. One of the biggest benefits that ETFs can offer is exposure to many stocks in one asset, but the Roundhill fund is too narrowly focused to provide that benefit.
Why is that important? The Roundhill Memory ETF is badly overbalanced in its top holdings, which means a sudden downturn for a single company’s stock could sting a lot more.
The Invesco fund, on the other hand, provides more than double the diversification, as it holds 37 different companies. It tracks the Dorsey Wright Technology Technical Leaders index of U.S. technology companies, which includes many memory stocks, and currently, no single stock has a weighting of more than 6.04%.
