Invesco Semiconductors ETF doubles in 5 months, lapping Wall Street's biggest funds

A $10,000 bet on the Invesco Semiconductors ETF at the start of 2026 was worth $20,496 by late May — more than double the return of any major Wall Street index fund.

The semiconductor trade that most active fund managers avoided has delivered a 105% return in five months, as AI capital spending broadened beyond megacap GPU designers to memory makers and equipment suppliers.

"Equal-weight exposure forced the fund into memory and capital equipment names just as those pockets of the market began to run," said Rachel Kim, semiconductor analyst at Edgen. "The mechanism is structural, not lucky."

PSI opened 2026 at $78.86 and closed at $161.63 on May 26, according to exchange data. The S&P 500 returned 10.07% over the same period, while the cap-weighted iShares Semiconductor ETF gained 89.42%. PSI's equal-weight structure held just 3.86% in Nvidia, instead concentrating its top weights in Micron Technology, Lam Research and Intel — names that benefited from surging memory chip pricing and rising wafer fabrication equipment spending.

The question for investors arriving in late May is whether the setup remains attractive at current prices. PSI has risen 13% in the past week and 19.85% in the past month, pricing in substantial forward optimism. Morningstar's Global Next Generation AI Index sits above fair value, having ranged from 74% to 114% of fair value since 2023.

Why PSI Outran Every Major Benchmark

The fund's edge comes down to one structural choice. PSI equal-weights roughly 30 semiconductor companies tracked through the Dynamic Semiconductor Intellidex Index, while cap-weighted rivals such as SOXX and the VanEck Semiconductor ETF concentrate heavily in the two or three largest names. That meant PSI carried only a 3.86% position in Nvidia — a handicap in 2025 but an advantage in 2026, when the market's rewards shifted to memory chips and semiconductor capital equipment.

Micron Technology, PSI's largest holding, rode a rebound in contract DRAM and NAND pricing. Lam Research and other wafer fabrication equipment makers benefited from hyperscaler capital expenditure upgrades that JPMorgan's 2026 outlook identified as the primary driver of tech sector earnings growth. Intel, another top weight, gained on the domestic chip production push and reshoring tailwinds. A smaller holding, Tower Semiconductor, surged 444% on a 12-month basis on the strength of defense radar contracts and supply-chain relocation work.

The broader context is a rotation that Goldman Sachs quantified in a May 20 research note. Large-cap active mutual funds increased their semiconductor overweight by 25 basis points to plus 49 basis points in the first quarter, while deepening their software underweight to minus 36 basis points — the widest semis-over-software tilt since at least 2012. Yet even as funds rotated into the AI infrastructure theme, only 29% of large-cap mutual funds are outperforming their benchmarks year-to-date, well below the historical average of 37%, according to Goldman.

What Changes at Current Prices

PSI's expense ratio of 0.56% and AUM of roughly $1.29 billion are unremarkable for the category. Its beta of 1.58 means it amplifies both upside and downside relative to the broader market. Over longer horizons the fund has delivered 217.23% over the trailing year, 298.59% over five years and 1,793.3% over ten years — all without leverage.

The conditions that produced the 2026 run remain largely intact. Wafer fabrication equipment spending is still expected to grow. Memory pricing has not rolled over. PineBridge's outlook projects roughly 25% annual growth in data center equipment for the next four to five years, anchored to electrical infrastructure constraints. The reshoring story still has years of capital expenditure behind it.

Three indicators are worth watching from here. First, contract DRAM and NAND pricing from the largest US memory maker, because that drives PSI's single largest weight. Second, quarterly capital expenditure guidance from the hyperscalers and from TSMC, because that spending is the order book for the major wafer fabrication equipment toolmakers. Third, the Philadelphia Semiconductor Index, because if SOXX rolls, PSI's higher beta means it will roll harder.

The honest read is that PSI's 2026 performance was earned through a structural mechanism that happened to suit the current regime. The fund did exactly what it was built to do. The part that will not repeat on the same scale is the entry price. Investors can still own the mechanism. They cannot still own the January 2 valuation.

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