The iShares Semiconductor ETF has delivered a 118% trailing 12-month return, compressing roughly six years of its 14.2% average annual gain into a single year.
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iShares Semiconductor ETF's 118% surge faces cooling second-year pattern
The iShares Semiconductor ETF returned about 118% over the past 12 months, dividends included, compressing roughly six years of its 14.2% average annual return into one year as spending on GPUs and AI infrastructure boomed.
The fund's monthly price history shows only two comparable stretches in its 25-year existence: a 97% gain through January 2004 as chip stocks rebounded from the dot-com bust, and a 109% gain through March 2021 powered by pandemic-era electronics demand and the first wave of chip shortages. Neither matched the current run — the trailing-year figure reached about 170% at the end of June, far beyond anything in the fund's history, before a recent pullback trimmed it to about 118%.
Both prior episodes cooled in the year that followed. After the early 2004 peak, the fund fell about 23% over the next 12 months, and five years later it was down more than half. The 2021 episode fared better in the short term — the next 12 months returned about 12% — but 2022 took the fund down 35% before it stabilized. The five-year outcomes diverged sharply: the 2004 buyer was still underwater three years on, while the 2021 buyer collected a 142% total return over five years, or about 19% a year, as the AI build-out delivered a demand wave larger than the pandemic ever created.
The fund now holds about $43 billion in assets across 30 holdings, with its three largest positions — Nvidia at about 9%, Advanced Micro Devices at 8.2%, and Broadcom at 8.2% — all riding the same AI spending cycle. Holdings trade at about 67 times earnings, pricing in years of continued demand growth.
Two Precedents, Two Different Five-Year Paths
The two prior runs agree on one thing: the year that follows a surge like this falls short of the fund's long-run average. After the 2004 peak, the next year delivered a 23% loss. After the 2021 peak, the next year returned about 12% — still well below the 14.2% average. But the five-year outcomes could hardly have been more different, and the divergence came down to demand, not the size of the run. A new demand wave arrived after 2021 in the form of the AI build-out; nothing comparable followed 2004.
The 2021 episode is the more instructive comparison for today's investors. The fund returned about 142% in total over the five years after that run, or about 19% a year, because the AI build-out handed the industry a bigger demand wave than the pandemic ever created. The 2004 episode ended in the depths of the financial crisis, with the fund down more than half five years after the peak. An investor who bought at the end of that first run waited about two years just to get back to even.
The AI Cycle Test
Today's version of that test is straightforward. The fund's holdings trade at about 67 times earnings, and roughly a quarter of the portfolio sits in Nvidia, AMD, and Broadcom — three names riding the same AI infrastructure spending cycle. This is not a diversified bet that semiconductors matter; it is a concentrated bet that AI infrastructure spending keeps compounding at prices that already assume it does.
The fund's performance has also dwarfed the broader market. While SOXX has returned about 108% in 2026 alone, the S&P 500 has climbed just 10% this year. The fund's compound annual return of 14.2% since 2001 also outpaces the S&P 500's 8.5% average over the same period, making it one of the strongest long-term sector vehicles available.
Micron Technology has been a standout contributor, with explosive demand for high-bandwidth memory (HBM) for data centers driving the stock's gains. Intel has also benefited from demand for data center CPUs suited to certain AI workloads. But there are early signs of cracks in AI spending: Alphabet CEO Sundar Pichai has fielded complaints about rising AI costs from customers, and Uber's chief operating officer has publicly questioned the company's AI spending justification. If that sentiment spreads, it could reduce demand for chips across the board.
It might continue. The 2021 buyers who looked wrong in late 2022 were rescued by exactly that kind of surprise. But at 67 times earnings, after a 118% year, the fund is priced as if the demand wave keeps building for years. The fund itself is a fine vehicle — 30 holdings, a 0.33% expense ratio — but the starting valuation is the uncomfortable part. A weak year two is not guaranteed, and the AI cycle may prove more durable than the two booms before it. Still, the 14.2% long-run average is the better number to plan around. Much of what the past year delivered above that pace arguably belongs to years that have not happened yet.
This article is for informational purposes only and does not constitute investment advice.
[1] One of the Biggest Chip ETFs Has Averaged 14% a Year Since 2001 and Just Made 118% in Twelve Months[2] One of the Biggest Chip ETFs Has Averaged 14% a Year Since 2001 and Just Made 118% in Twelve Months - AOL[3] The iShares Semiconductor ETF Is Obliterating the S&P 500 in 2026, but Is It Still a Buy? The Answer Might Surprise You. - The Globe and Mail[4] One of the Biggest Chip ETFs Has Averaged 14% a Year Since 2001 and Just Made...
