The Invesco Semiconductors ETF (PSI) traded at $152.85 Thursday afternoon, down 0.40% from the previous close. The fund’s market capitalization stands at $3.82 billion, with an average daily volume of about 461,000 shares.
PSI is 19.2% below its 52-week high but remains 166.5% above its low. The fund returned 102.37% from December 31, 2025, to July 6, 2026—outperforming the VanEck Semiconductor ETF by nearly 37 percentage points. Since then, it has given back nearly a fifth of its gains.
The Nvidia Effect
The fund’s outperformance comes from one key difference: it barely owns Nvidia. PSI tracks the Dynamic Semiconductor Intellidex Index, a rules-based model that ranks U.S. semiconductor companies on momentum, quality, value, and management factors—not market capitalization. Nvidia accounts for just 4.29% of the fund, compared to 18.41% in the VanEck ETF.
Nvidia’s underperformance this year has dragged down cap-weighted funds. Meanwhile, memory, analog, and equipment stocks have surged, benefiting PSI’s mid-cap, equipment-heavy portfolio. On Thursday, STMicroelectronics fell 14% to 17% on weak guidance, while Micron rose 0.4%. Nvidia slipped 1.3%, and AMD declined 1.2%. SK Hynix’s U.S. shares gained 2.8%.
A potential problem exists. If Nvidia and Broadcom rebound, PSI’s momentum-based model could become a liability. The index reweights holdings based on rank, not performance, meaning it mechanically sells winners as they rise.
A Fund Built for Volatility
PSI’s construction amplifies risk. The fund holds 31 to 33 stocks, with the top 10 making up 50.19% of assets. Its focus on mid- and small-cap semiconductors makes it more volatile than large-cap alternatives. On Thursday, it swung 2.85% intraday without any fund-specific news.
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The broader sector has been equally turbulent. The iShares semiconductor ETF entered a bear market earlier this month after falling more than 20% from its June high. Liquidity adds another layer of risk, as execution costs can eat into returns for a fund of this size.
Investors should note that PSI is a tactical play, not a core holding. It suits those who can tolerate a 20% drawdown in a month—something it has already experienced this quarter. The current pullback may improve entry points, but the fund’s structure ensures continued volatility.
The momentum-driven model’s ability to adapt if sector leadership shifts remains uncertain. If Nvidia and Broadcom regain their footing, the same factors that drove PSI’s success could work against it.
Capital equipment makers, which make up 19% of PSI, have order books stretching years into the future. The gap between industry strength and PSI’s 19% drawdown highlights the market’s central tension. Either stocks moved ahead of fundamentals, or investors are pricing in an end to the AI-driven capital expenditure boom. Thursday’s movements suggested the latter: Alphabet raised its 2026 capex guidance to $195 billion to $205 billion, but the market responded by repricing the entire semiconductor supply chain.
If hyperscalers like Microsoft, Meta, and Amazon signal sustained spending next week, PSI’s holdings could recover. Otherwise, the fund’s model may face its toughest challenge yet.
Retailers are also expanding rapidly in Europe. New stores are opening to meet demand, reflecting broader industry growth.
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