This Sector Has Dominated ETF Returns So Far in 2026

So far this year, semiconductors and the physical infrastructure of artificial intelligence (AI) are dominating the exchange-traded fund (ETF) scene. For example, the iShares Semiconductor ETF (NASDAQ: SOXX) is up 89% year to date. Given the intense interest -- and investments -- in AI, this makes sense.

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What's driving the semiconductor boom

Semiconductors and AI reinforce each other in a tight loop. AI depends on ever more sophisticated chips to run. Now, AI is changing how chips are designed and where they're manufactured. In short, AI is designed to perform tasks that normally require human intelligence, and semiconductors are the physical devices that enable it to do so.

Driven by AI and data-center demand, the chip industry is in a powerful up cycle. With large cloud providers spending heavily on AI infrastructure, the entire semiconductor value chain is lifted. Greater demand for central processors, graphics processors, power management, memory, and manufacturing equipment is like catnip to investors -- so much so that semiconductor revenue reached $298.5 billion in the first quarter of 2026, up a staggering 25% from the fourth quarter of 2025.

A closer look at an ETF that's soaring

As a passively managed ETF, the iShares Semiconductor ETF provides exposure to large-cap and mid-cap companies, primarily through U.S.-listed stocks. It tracks the NYSE Semiconductor Index and currently holds a concentrated basket of 30 stocks.

Top holdings include industry leaders such as Micron Technology, Advanced Micro Devices, and Marvell Technology.

With a reasonable expense ratio of 0.34%, or $34 per $10,000 invested annually, SOXX provides access to a narrowly focused group of sector-specific ETFs.

Predicted to top the $1 trillion threshold by the end of 2026

IDC's April forecast predicted that the semiconductor market will exceed the $1 trillion revenue threshold by the end of this year. However, investing in a semiconductor ETF is not the right move for everyone.

As an investor, it's vital to remember that anything could happen. For example, AI could lose popularity for any number of reasons, from hype fatigue to slower-than-expected adoption or constraints on power and data-center buildouts. Like all technology, semiconductor stocks and ETFs can be volatile, and there's no guarantee that they'll continue to thrive.

Before leaping, look past the current hype and make sure you've taken a close enough look under the hood to know precisely what you're buying. If you do choose to put money into a semiconductor ETF, it should be part of a well-diversified portfolio that you intend to hold for the long term.

Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Marvell Technology, Micron Technology, and iShares Trust - iShares Semiconductor ETF. The Motley Fool has a disclosure policy.