Heavy Tech Weighting Poses Challenge for iShares MSCI World ETF

The iShares MSCI World ETF, a fund tracking developed markets with over $6.6 billion in assets under management, faces a testing period as significant sector rotation pressures its performance. Despite a strong start to the year with gains of approximately 20%, the final quarter has seen a marked shift in investor sentiment.

A decisive move away from highly valued technology stocks and into more defensive sectors is now underway. This presents a particular challenge for the ETF, given its substantial concentration in tech. The fund's expense ratio stands at 0.24%, but its heavy reliance on U.S. technology giants—which constitute over 70% of the portfolio—has emerged as a key risk factor during this shift.

AI Reassessment and Macro Backdrop

The dominant market theme of Q4 2025 is a critical reassessment of artificial intelligence (AI) equities. Following the semi-annual MSCI index review in late November, questions regarding the near-term profitability of massive AI investments have come to the fore. While infrastructure spending remains elevated, valuations for mega-cap technology names have come under pressure.

This recalibration is occurring against a macroeconomic backdrop stabilized by the strong expectation—with a probability exceeding 80%—of a Federal Reserve interest rate cut in December. The U.S. economy continues to show moderate but resilient growth. Furthermore, the fund's deliberate exclusion of emerging markets, including China and India, has shielded it from recent weakness in key Asian economies.

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

A Concentrated Portfolio

Although the ETF holds roughly 1,300 positions, its performance is heavily influenced by a handful of major holdings. The top ten constituents alone contribute nearly 28% of its returns. Nvidia leads with a 5.3% weighting, followed by Apple at 5.1% and Microsoft at 4.1%. Other significant positions include Amazon, Alphabet, Broadcom, Meta, Tesla, and JPMorgan Chase.

Sector allocation reveals a pronounced tilt: information technology accounts for about 28% of the fund, while financials make up 16%. The November index adjustment, which added CoreWeave A to the MSCI World Index, further reinforces this digital infrastructure focus. Such concentration increases the fund's vulnerability to sentiment swings within the U.S. technology sector.

Performance Outlook

November delivered volatile trading despite the fund's robust year-to-date figures. The ongoing rotation into defensive areas like healthcare and consumer staples is dampening short-term momentum. Should the shift into value-oriented stocks accelerate in December, the ETF risks underperforming more balanced indices. The coming weeks will determine whether its tech-heavy composition becomes a drag or if valuations find a stable footing.