The semiconductor sector typically moves in cycles. It can experience long periods of strong growth, but then be followed by a slowdown or contraction. When the structural environment changes, the industry's leaders can see big returns for years.
That's what we've seen over the past couple of years in the semiconductor space. And it could be a nice setup for the iShares Semiconductor ETF (SOXX 3.48%) in 2026.
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Prediction: SOXX will outperform the S&P 500 & Nasdaq 100 in 2026 as AI infrastructure spending accelerates
Over the past few years, semiconductor chips have been the core component of the artificial intelligence (AI) revolution.
In 2024 and 2025, the focus was building the infrastructure necessary to support high growth and demand. In 2026, the story likely broadens into a theme of more full-scale adoption. That could benefit the "next-in-line" companies involved in cloud computing, autonomous systems, and data centers.
NASDAQ: SOXX
Key Data Points
All of these trends rely on semiconductors, and the buildout to support AI is likely to last for years. That means billions of dollars of investment will continue to flow into this space. That gives the sector a very good chance for success where the biggest winners may go beyond just Nvidia (NVDA 1.53%) and Broadcom (AVGO 1.63%).
And so far they have. Applied Materials (AMAT 3.93%), Micron Technology (MU 3.21%), and Advanced Micro Devices (AMD 3.46%) -- all top-five holdings of the iShares Semiconductor ETF -- have all delivered 18%+ gains this year (as of Jan. 26, 2026) to help lift performance.
NVDA Total Return Price data by YCharts
That kind of breadth will be the key to sustained outperformance. And it should lead to market-beating returns again in 2026.
