The iShares Semiconductor ETF Is Obliterating the S&P 500 in 2026, but Is It Still a Buy? The Answer Might Surprise You.

The iShares Semiconductor ETF (NASDAQ: SOXX) is an exchange-traded fund (ETF) that exclusively invests in American companies that design and manufacture chips and components, but it's particularly focused on those involved in the artificial intelligence (AI) segment of the market.

As a result, the fund has large positions in stocks like Micron Technology, Advanced Micro Devices, and Nvidia, which have contributed to its staggering 108% return in 2026 so far. It's crushing the S&P 500 (SNPINDEX: ^GSPC) index, which has climbed by just 10% this year.

Is there still time for investors to buy the iShares ETF, or have they missed the boat? The answer isn't as clear-cut as you might think.

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A concentrated portfolio of America's best chip stocks

The iShares Semiconductor ETF holds just 30 stocks, so it's highly concentrated. It's also very top-heavy, because its 10 largest holdings represent 62.2% of the value of its portfolio. However, that list includes just about every leading supplier of AI chips and components in the industry:

Data source: iShares. Portfolio weightings are accurate as of June 12, 2026, and are subject to change.

Considering those 10 stocks have produced an average return of 136% this year, it's no surprise the iShares Semiconductor ETF is beating the S&P 500 by a factor of 10.

MU data by YCharts

Micron Technology stock is leading the way, thanks to explosive demand for the company's high-bandwidth memory (HBM) for data centers, which is a critical piece of the AI hardware stack. Micron is scheduled to report its operating results for its fiscal 2026 third quarter (which ended on May 31) on June 24, and management's guidance suggests revenue more than tripled, while earnings soared tenfold.

Intel is another top performer, thanks to significant demand for the company's data center central processing units (CPUs), which are better suited to some AI workloads than graphics processing units (GPUs). For example, Intel's CPUs give AI agents the computing power they need to autonomously plan workflows and repeatedly access external software tools. AI is also reviving Intel's foundry business, as customers race to lock in manufacturing capacity amid the global semiconductor shortage.

Nvidia stock has produced a muted return this year, as it consolidates a gain of more than 12-fold since the start of 2023. Demand continues to exceed supply for the company's GPUs, which are still the primary data center chips used in most AI training and inference workloads. As a result, its stock likely has more room for upside.

Is the iShares Semiconductor ETF still a buy?

The iShares Semiconductor ETF has delivered a compound annual return of 14.9% since it was established in 2001, outpacing the S&P 500, which returned an average of 8.5% per year over the same period. Therefore, its market-beating performance in 2026 isn't a once-off.

From that perspective, the iShares ETF looks like a great addition to any diversified portfolio. But there is certainly room for caution right now, given the blistering gains in some of its largest holdings. Micron, for example, is benefiting from one of the biggest supply-demand imbalances for memory chips in history, which is allowing the company to dictate prices. As a result, its profit margins are through the roof.

But this is unlikely to last because the entire industry is working hard to build more manufacturing capacity, and when supply eventually catches up to demand, companies like Micron will struggle to grow their earnings from these elevated levels.

Speaking of demand, there might be some cracks forming. Alphabet CEO Sundar Pichai recently said he's fielding complaints about rising AI costs from several customers. Around the same time, the chief operating officer of Uber Technologies publicly said it's getting harder to justify his company's AI spending. If this sentiment spreads, it could result in lower demand for chips across the board.

In summary, it isn't necessarily a bad idea to buy the iShares Semiconductor ETF today given its strong track record, but it has never been more important to maintain a long-term investment horizon of five years or more, because the risk of volatility certainly seems to be rising.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Applied Materials, Broadcom, Intel, Lam Research, Marvell Technology, Micron Technology, Nvidia, Qualcomm, Uber Technologies, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends KLA. The Motley Fool has a disclosure policy.