Semiconductor ETF surges 54% in 2026 by excluding Intel from portfolio

A semiconductor ETF tracking high-growth chip names has surged 54% year-to-date while holding zero shares of Intel, the once-dominant chipmaker now struggling to regain manufacturing leadership.

A semiconductor ETF has surged 54% this year by excluding Intel Corp., betting instead on chipmakers tied to the AI infrastructure boom — a strategy that has widened the performance gap between the sector's winners and laggards.

"The fund's mandate targets companies with exposure to AI accelerators and advanced manufacturing, which naturally excludes Intel given its foundry challenges," said Rachel Kim, semiconductor analyst at Edgen. "Intel's absence is a feature, not a bug."

The ETF's top holdings include Nvidia Corp., Advanced Micro Devices Inc., and Taiwan Semiconductor Manufacturing Co., which together have benefited from surging demand for AI chips and high-bandwidth memory. Nvidia alone has gained more than 878% over the past five years, while Intel has lost roughly half its market value over the same period amid manufacturing delays and market share losses to AMD in both data center and PC processors.

The divergence highlights a structural shift in the semiconductor industry: companies tied to AI compute are capturing disproportionate value, while legacy chipmakers face an uncertain transition. The ETF's 54% gain this year versus the Philadelphia Semiconductor Index's roughly 35% advance suggests concentrated exposure to AI-linked names is driving outperformance — but also leaves the fund vulnerable to any pullback in AI capital spending.

The fund's portfolio construction reflects a deliberate bet on the AI supply chain. Nvidia commands the largest weighting, followed by AMD and Broadcom Inc., all of which have reported triple-digit revenue growth in their data center segments. TSMC, the exclusive manufacturer of Nvidia's and AMD's most advanced chips, has seen its shares rise more than 90% this year as it expands 3-nanometer capacity across Taiwan, Arizona, and Japan.

Intel's exclusion is notable given its historical dominance. The company was the world's largest semiconductor maker by revenue as recently as 2020, but manufacturing stumbles on its 7nm and subsequent nodes allowed TSMC to pull ahead. Intel's foundry services business, a key pillar of Chief Executive Officer Pat Gelsinger's turnaround plan, has yet to secure a marquee external customer, and the company's shares have fallen more than 50% from their 2021 peak.

Concentration Risk Cuts Both Ways

The ETF's top three holdings account for roughly 45% of assets, a concentration that has amplified gains this year but would magnify losses in a downturn. Nvidia trades at about 30 times forward earnings, a discount to its five-year average but still a premium to the broader market. Any slowdown in AI infrastructure spending — or a shift in chip procurement toward in-house designs from companies like Amazon.com Inc. and Alphabet Inc. — could pressure the fund's largest positions.

What the Intel Exclusion Signals for Investors

The fund's performance underscores a broader re-rating in semiconductor valuations. Companies with direct AI exposure now command price-to-sales multiples two to three times those of legacy chipmakers. Intel's market capitalization of roughly $90 billion is less than one-tenth of Nvidia's, a reversal of the pecking order that defined the industry for decades.

For investors, the ETF offers a concentrated bet on the AI chip cycle but carries single-name risk that a more diversified semiconductor fund would mitigate. The fund's 54% year-to-date return reflects the market's conviction that AI-driven demand will sustain — a thesis that will be tested when major cloud providers report their next quarterly capital expenditure figures.

This article is for informational purposes only and does not constitute investment advice.