PSI ETF has been one of the semiconductor market’s biggest winners, climbing 131% over the past 12 months and 76.91% year to date as of August 19. That performance, however, now comes with a more difficult backdrop after a sharp sector repricing in late August.
The Invesco Semiconductors ETF, with roughly $2.6 billion in assets, gave up about 25 percentage points of year-to-date performance between early July and August 19. A fund built to exploit momentum in chip stocks is entering September just as momentum has weakened in equipment, memory, and second-tier AI names.
The key issue for investors is not whether PSI delivered strong returns. It did. The question is whether the same portfolio structure that powered outperformance can continue working as interest-rate pressure rises and the semiconductor rally becomes narrower.
Key Facts
- PSI returned 131% over the trailing 12 months and 76.91% year to date as of August 19.
- The fund surged 102.37% from December 31, 2025 to July 6, 2026 before surrendering roughly 25 percentage points of that gain in six weeks.
- Nvidia represented 5.89% of PSI, while Applied Materials was the largest holding at 6.87% and Micron ranked fourth at 5.57%.
- PSI charges an expense ratio of about 0.56% to 0.57% and has averaged 18.18% annually since its June 23, 2005 launch.
- Five-day net inflows totaled $35.54 million even as fund assets dropped by about $169.9 million, reflecting market losses despite fresh buying.
PSI ETF
PSI stands out from larger semiconductor ETFs because it does not follow a simple market-cap-weighted approach. Instead, it tracks a rules-based index that selects 30 semiconductor-related stocks using factors including price momentum, earnings momentum, quality, management action, and value. That process helped the fund outperform by leaning more heavily into semiconductor equipment makers and memory names rather than concentrating in Nvidia.
That positioning was highly effective during the strongest phase of the AI capital-expenditure cycle. Upstream beneficiaries such as Applied Materials, KLA, Lam Research, and Micron captured spending on wafer-fab equipment and high-bandwidth memory before the market’s gains became more concentrated. This is a major reason PSI beat broader semiconductor benchmarks over the past year.
Now the same exposure is becoming a source of risk. Equipment and memory are among the most cyclical corners of the chip industry. When markets begin to question the pace of future AI spending or reprice long-duration growth assets because of higher Treasury yields, those stocks can fall faster than the mega-cap leaders. That matters for PSI because its portfolio is tilted toward exactly those segments.
PSI’s outperformance was built by owning the parts of the semiconductor market that led first, and those are now the same parts under the greatest pressure.
Why the fund’s structure matters now
PSI is not just a semiconductor ETF; it is a semiconductor momentum strategy. Two of its core selection factors are price and earnings momentum, which means the fund systematically favors stocks that have already been working. In a sustained uptrend, that can be a powerful advantage. In a turning market, it can leave investors holding names that were selected near a peak.
The timing is important because the fund rebalances quarterly in February, May, August, and November. The latest reconstitution occurred before some of the sector’s most damaging late-August moves, including a steep drop in Marvell and a broader selloff in semiconductor ETFs even after Nvidia posted another exceptional earnings report. If weakness persists into October, the next major portfolio adjustment will not come until November.
The concentration profile also adds to volatility. At one measurement point, the top 10 holdings represented 50.19% of assets. Combined with an overweight in mid- and smaller-cap chip names, that creates a more aggressive risk profile than traditional peers. The fund’s 9.40% single-session decline on July 2 offered a clear reminder of how fast momentum can reverse in this structure.
Implications for Investors
For investors, PSI remains a high-beta way to express a bullish semiconductor view, but it is less suited to being treated as a core, low-volatility sector allocation. Its trailing 12-month gain is impressive, yet the long-run annualized return since inception is 18.18%, a far more realistic guide to what disciplined holders might expect over a full cycle. The recent drawdown shows how quickly extraordinary returns can compress.
Macro conditions are now central. Higher yields are reducing the value investors assign to future earnings, a key issue for a fund trading on rich expectations. PSI carried a price-to-earnings ratio of 65.96 as of July 1, a demanding valuation for a portfolio exposed to cyclical earnings. Treasury yields near 4.72% on the 10-year and 5.21% on the 30-year increase pressure on high-multiple technology assets, even when company-level results remain strong.
Earnings reactions also deserve close attention. Nvidia reported fiscal second-quarter revenue of $96.2 billion, up 106% year over year, while adjusted earnings reached $2.22 per share versus expectations of $2.09. Yet the broader semiconductor group still struggled to hold gains. Marvell, for example, fell 10.3% in one session despite posting revenue of $2.74 billion, earnings of 94 cents per share, and a higher long-term outlook. When strong reports stop driving sustained rallies, it often signals a tougher phase for momentum funds.
Investors should also watch fund flows versus assets. PSI attracted $748 million of net inflows over the past year, and five-day inflows remained positive at $35.54 million. But if positive flows can no longer offset falling prices, the support from new buyers may be weakening. For a strategy that has grown rapidly as performance accelerated, that shift could matter if market sentiment turns more decisively defensive.
Looking ahead, the next tests for PSI will come from semiconductor earnings, AI infrastructure spending trends, and the rate outlook into the November rebalance. If the chip sector stabilizes, the fund’s rules-based approach could again amplify upside; if the current rotation and multiple compression continue, PSI may remain more vulnerable than broader semiconductor ETFs.