The MSCI World ETF’s Transformation: A Concentrated Bet on U.S. Tech and AI

A significant evolution is underway within one of the world's most prominent equity funds. By late 2025, the iShares MSCI World ETF (URTH), once considered a diversified gateway to developed markets, has morphed into a concentrated portfolio heavily weighted toward U.S. technology giants. This shift underscores a broader market reality: the index it tracks is no longer a balanced global basket but increasingly a momentum play centered on American innovation, particularly in artificial intelligence infrastructure.

The fund's composition underwent a dramatic change in the fourth quarter of 2025. Despite holding approximately 1,320 individual securities, its diversification has become top-heavy. A record-breaking concentration has emerged, with the top ten holdings now accounting for nearly 28% of the entire portfolio. This development means the fund's apparent global diversification masks a substantial bet on a select few U.S. technology behemoths.

Leading this charge is Nvidia, which has surpassed both Apple and Microsoft to become the fund's largest holding. This "Nvidia flip" symbolizes a fundamental transition from consumer electronics to pure computing power as the primary growth engine for major indices.

"U.S. Exceptionalism" Drives Performance

The performance gap between the United States and other developed economies continues to widen. This trend, often termed the "U.S. Exceptionalism" trade, has propelled the URTH ETF to successive record highs. It has delivered an impressive annual performance of 18-19%, significantly outpacing markets outside the United States.

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

While Federal Reserve policy has stabilized, the fund's momentum is not primarily driven by monetary conditions. Instead, its gains stem directly from the robust earnings growth of its largest constituent companies. Furthermore, the strength of the U.S. dollar has acted as a headwind, placing additional pressure on the fund's European and Japanese positions.

The Sustained AI Infrastructure Cycle

Unlike broader market rallies of the past, gains in 2025 have remained narrowly focused. The semiconductor and software sectors continue to capture the lion's share of market appreciation. The persistent investment cycle in AI infrastructure, coupled with resilient cloud computing demand, underpins this sector dominance.

The trajectory of the iShares MSCI World ETF highlights a market increasingly led by a handful of firms at the forefront of the AI revolution, reshaping what investors can expect from a core developed markets allocation.