AI investing pivots from chips to software layers
The market narrative around artificial intelligence is shifting. After comparing every generative AI ETF, analysts say the real unwind of upside may come from software layers that turn compute into repeatable products, not just the silicon that enables it. The first wave of AI bets chased semiconductor leadership and hardware breakthroughs, but many portfolio managers now argue the next phase hinges on applications, platforms, and model providers that sit atop raw compute.
Market data from early 2026 show the chip-focused crowd still has a pulse, but the appetite for software-driven AI exposure has grown. The broad benchmark tracking semiconductors surged earlier in the year, yet investors are increasingly looking for funds that concentrate on the recurring revenue model of AI software and services. This backdrop helps explain why three ETFs—IGPT, CHAT, and ARTY—are drawing attention for their emphasis on the software layer of AI infrastructure.
Three ETFs that zero in on the software layer
IGPT, CHAT and ARTY each attempt to capture different facets of the software-driven AI economy. Their common thread is exposure to firms that monetize AI through applications, platforms, and developer ecosystems rather than through hardware sales alone.
- Invesco AI and Next Gen Software ETF (IGPT) focuses on software developers embedding AI into products and services. The approach is to tilt toward companies expanding AI capabilities within their software offerings, from productivity suites to enterprise platforms. In the current market, IGPT has shown resilience as software revenue models appear to weather hardware cycles better. Year-to-date gains have run in the mid-single digits to mid-teens range, signaling investor interest in software-led AI wins.
- Roundhill Generative AI & Technology ETF (CHAT) takes an actively managed route, targeting a blend of enterprise software and large-cap technology names that are positioned to benefit from generative AI. Since inception, CHAT has posted eye-catching upside through stock-selection bets on software players alongside some cloud and platform plays. While the fund’s performance accelerates the most during periods of AI enthusiasm, it also carries the potential for wider discretion-driven volatility typical of active funds.
- iShares Future AI & Tech ETF (ARTY) pairs hardware leaders with forward-looking software names to reflect a blended AI ecosystem. Its roster straddles semiconductor and silicon-centric firms—think leading chipmakers—while also including software-intensive firms that could ride AI adoption curves. ARTY’s asset base stands above a couple of billion, underscoring steady demand for a balanced AI exposure that spans hardware and software.
These three funds illustrate how the market is carving out a middle tier between raw compute and end-user AI products. The software layer invites more predictable revenue streams through licensing, subscriptions, and recurring services, which many investors favor in a volatile AI cycle.
What makes the software layer attractive now
The software layer of AI infrastructure has historically lagged the enthusiasm for chip gains, but several factors are converging to change that dynamic. Enterprise budgets are increasingly allocating more to AI-enabled software applications—customer-relationship tools, data analytics platforms, and enterprise AI APIs—than to new hardware buildouts. When IT spending shifts from capital expenditure on infrastructure to ongoing software subscriptions and service arrangements, the revenue profiles of software-focused AI firms can become more durable.
Industry data through May 2026 show a noticeable tilt toward software spending as companies seek to embed AI into daily workflows and customer experiences. That shift is helping funds like IGPT, CHAT, and ARTY outperform pure hardware plays during market pullbacks and in periods of broad tech volatility. A senior portfolio manager who tracks AI themes said, on condition of anonymity, that the software layer is where AI profits start to look more like traditional software franchises—recurring, scalable, and less exposed to cyclical hardware cycles.
Key data points you should know
Here are concise takes on each ETF’s tilt and performance, based on the latest available data and fund disclosures:
- ARTY — Focus: a blended mix of hardware leaders and software specialists. Trend: a recognizable option for investors who want broad AI exposure without extreme concentration. Notable takeaway: ARTY’s asset base is robust, signaling steady investor demand for a fund that bridges hardware and software in the AI ecosystem.
As of the latest data, ARTY reports roughly 2.1 billion dollars in assets, highlighting investor interest in a balanced AI basket. IGPT’s and CHAT’s assets are sizable as well, with interest concentrated on software-enabled AI themes rather than pure silicon bets. The takeaway: after comparing every generative AI ETF, the software layer funds are gaining ground as a way to capture AI upside with a revenue model less dependent on hardware cycles.
Why investors care about the software layer
The allure of software-driven AI lies in recurring revenue. Subscriptions, usage-based fees, and platform licensing often produce steadier cash flows than one-off hardware deals. For investors, this translates into potentially lower margin volatility and improved visibility into long-term growth. In practice, a software-focused AI ETF can offer easier portfolio-to-portfolio alignment for investors seeking a steadier AI exposure that complements hardware bets.
Experts also point to the diversity within software payloads. Some funds tilt toward AI-native software platforms and model providers, others emphasize AI-enabled business applications, and a few blend these pieces with select cloud infrastructure names. The result is a spectrum of risk-and-reward profiles within the software layer approach, which is why after comparing every generative AI ETF, many analysts highlight the importance of understanding each fund’s underlying tilt rather than chasing headline performance alone.
Risks and considerations when chasing software AI profits
No investment is without risk, and AI-focused software exposure is no exception. Here are the main considerations to weigh before allocating to IGPT, CHAT, or ARTY:
AI software names can experience rapid shifts in sentiment. Active management, in particular, can produce big swings if portfolio managers shift bets quickly to capitalize on new AI narratives. While software exposure broadens the base beyond hardware, a few dominant software developers or platform players can still drive fund performance. Diversification within the fund remains important. Software revenue often hinges on enterprise IT budgets and corporate spending cycles. A slower macro backdrop could temper AI spend, impacting returns for all three funds. As AI adoption grows, regulatory changes and data-security concerns could influence the profitability and risk profiles of software-centric AI companies.
Investors should also remember that the software layer is just one axis of AI exposure. The broader AI story encompasses hardware cycles, cloud infrastructure, and the expanding universe of AI models and services. After comparing every generative AI ETF, it becomes clear that a balanced approach—blending software-layer bets with hardware-focused bets—may help smooth outsized drawdowns during unpredictable market moves.
How to think about adding these ETFs to a portfolio
For investors weighing the software layer to complement existing AI exposure, a few practical steps can help. First, clarify your time horizon and risk tolerance. The software layer can offer resilience, but it also carries different volatility dynamics than chip-focused funds. Second, consider how much of your AI sleeve you want to allocate to software innovations versus hardware leadership. Third, review each fund’s construction: IGPT leans toward software developers; CHAT blends active stock picks in software and tech; ARTY offers a measured mix of hardware names and software players. Finally, align your selection with your tax strategy and trading preferences, since active and passive funds can have different tax implications and turnover characteristics.
As markets evolve in 2026, investors are asking not just where AI profits come from, but how steady and scalable those profits may be. The software layer argument suggests a more durable AI profit stream, provided demand for AI-enabled software continues to expand across industries. And as the market monitors enterprise AI spending in real time, the phrase after comparing every generative AI ETF takes on new meaning: the next wave of gains may hinge less on chips and more on software that turns AI capabilities into everyday business outcomes.
Bottom line
The AI investment landscape is progressing beyond the first instinct to chase hardware leadership. Three ETFs that focus on the software layer—IGPT, CHAT, and ARTY—offer a differentiated way to capture AI upside through recurring revenue models and enterprise software adoption. While past performance, especially for CHAT’s active approach, has been colorful, the true test will be how these funds navigate potential shifts in IT budgets and AI adoption cycles in 2026 and beyond. For investors contemplating a move into AI, after comparing every generative AI ETF, this trio represents a meaningful slice of the AI economy that prioritizes software-driven value over hardware fanfare.
Note: All data cited reflects the latest fund disclosures and market data available as of May 2026 and is subject to change. Returns are not indicative of future results.
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