The Shifting Core of a Global ETF: How Tech Concentration Redefines Diversification

The iShares MSCI World ETF (URTH) delivered a remarkable performance in 2025, posting gains of approximately 22 percent. However, this strong return masks a fundamental evolution in the fund’s composition. With NVIDIA now its largest holding and U.S. equities accounting for 70 percent of its assets, the product is diverging significantly from traditional global diversification principles. This altered risk profile increasingly positions the ETF as a concentrated bet on the American technology sector.

Perhaps the most notable change over the past year has been the reshuffling at the top of the fund’s holdings. NVIDIA has overtaken both Apple and Microsoft to claim the leading position, representing 5.45 percent of the portfolio. The top ten holdings collectively make up 27.3 percent of the total fund assets.

This concentration is mirrored in the geographic allocation. U.S. stocks constitute roughly 70 percent of the portfolio, leading some market strategists to characterize the strategy as "S&P 500 plus." The technology sector alone commands about 28 percent; when adding communication services giants like Alphabet and Meta, over 35 percent of assets are allocated to growth-oriented tech areas. In this context, international exposures from Japan, the UK, or Canada act primarily as currency diversifiers rather than independent sources of growth.

Valuation Premiums and Competitive Landscape

The focus on growth stocks comes at a cost. With a price-to-earnings (P/E) ratio of 26.29, the ETF is priced at a notable premium compared to its category average of 20.45. While the fund offers broader exposure with around 1,320 holdings than many peers, its heavy reliance on the "Magnificent Seven" tech stocks substantially increases its sensitivity to volatility in the semiconductor and artificial intelligence sectors.

Should investors sell immediately? Or is it worth buying MSCI World ETF?

A comparison with other global funds highlights URTH's specific positioning. By excluding emerging markets, it differs from alternatives like the Vanguard Total World Stock ETF (VT) or the iShares MSCI ACWI (ACWI). In 2025, the Vanguard fund achieved a slightly higher return, aided by its emerging markets component and a significantly lower expense ratio of 0.07 percent, compared to 0.24 percent for URTH.

Key Drivers for the Year Ahead

Looking forward to 2026, three primary factors will be crucial for the ETF's trajectory. First, performance remains heavily dependent on the valuations of U.S. tech behemoths; a correction in this sector would impact this fund more severely than more broadly diversified value-oriented funds. Second, currency movements will play a role: sustained weakness in the U.S. dollar against the euro and yen would bolster the value of the 30 percent international allocation when converted.

Third, the AI investment cycle will continue to influence weightings. If the AI boom expands from hardware (semiconductors) into software and industrial applications, the extreme concentration on a handful of top names could moderate somewhat.

Conclusion

The iShares MSCI World ETF has established itself as a high-performing core investment for developed markets, a status earned in 2025 largely through its substantial U.S. tech concentration. This very strength, however, represents the principal risk for investors seeking genuine worldwide diversification. Choosing to invest in URTH today is effectively a decision to hold a U.S.-dominated growth portfolio, whose fortunes remain closely tied to the success of Silicon Valley.