Concentration Concerns Emerge as Nvidia Leads MSCI World ETF

MSCI World ETF US4642863926

The iShares MSCI World ETF (URTH) delivered a robust 21.6% return for investors in 2025. However, beneath the surface of this core global investment vehicle, a significant concentration risk is developing. The performance gap is notable when compared to emerging markets, which surged past the "world ETF" with gains exceeding 34%. The fate of the URTH is now heavily tied to a single sector and a new leading constituent.

A fundamental shift has occurred within the ETF's portfolio composition. Nvidia has now surpassed both Apple and Microsoft to become the largest holding in the underlying index. This change in leadership highlights the fund's extreme reliance on the continuing artificial intelligence boom. Although the fund holds approximately 1,320 securities, its top ten positions collectively account for roughly 27.3% of its total assets.

With an allocation to US equities exceeding 70%, the ETF effectively acts as a proxy for large American corporations. The fund's international diversification has recently served as a drag on returns, as dynamic emerging markets are, by definition, excluded from the MSCI World index.

Stretched Valuations and Strategic Drawbacks

This high concentration is pushing valuation multiples upward. The index is trading at a historically rich price-to-earnings (P/E) ratio of around 24. Current market conditions appear to be "priced for perfection." Should the earnings of the top three holdings—Nvidia, Apple, and Microsoft—disappoint, their substantial weightings could trigger disproportionate declines.

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

The limitation of a developed-markets-only strategy becomes clear in a direct performance comparison. The broader MSCI ACWI index, which includes emerging markets, outperformed the URTH by more than 120 basis points in 2025. Investors focused on global growth outside the United States achieved superior results.

Technical Levels and Future Catalysts

From a chart perspective, the ETF is trading just below its all-time highs. The $185 level represents a key area of short-term support. A decisive breakout above the recent peak near $188 would confirm the bullish trend, while a sustained move below $180 could signal the beginning of a corrective phase.

Looking ahead to Q1 2026, currency movements will be a critical factor alongside technology sector earnings. Any further weakening of the US dollar would provide a tailwind for the roughly 30% of the portfolio allocated to international stocks, potentially helping to close the performance gap with emerging markets. Market strategists also anticipate a potential sector rotation into financials and communication services, which could slightly reduce the current heavy reliance on technology.