The MSCI World ETF’s Ascent: A Record-Breaking Year Fueled by Tech

The iShares MSCI World ETF (URTH) is concluding 2025 on a powerful note, continuing its impressive run by attracting significant investor capital and reaching unprecedented valuation levels. This surge is largely attributed to the global enthusiasm surrounding artificial intelligence and robust equity performance in developed nations. However, the fund’s elevated price point prompts a critical evaluation: do the future growth prospects justify its current premium?

Key Highlights at a Glance

• Year-to-Date Return: The fund has delivered gains exceeding 22% since the start of the year.
• Assets Under Management: Its total assets have climbed past the $6.7 billion threshold.
• Top Holding Shift: NVIDIA has now ascended to become the fund’s largest individual portfolio position.

A Concentrated Bet on American Technology

The portfolio’s composition reveals the primary engine behind this rally. With U.S. equities now constituting approximately 70% of the fund’s holdings, the ETF effectively represents a concentrated bet on American technological supremacy. A notable shift has occurred at the very top of its holdings list. The semiconductor giant NVIDIA, commanding a weighting of nearly 5.5%, has overtaken both Apple and Microsoft to lead the roster of 1,320 constituent companies.

This heavy tilt toward the technology sector, which alone accounts for almost 30% of the fund, proved to be the decisive success factor in 2025. Massive investments in AI infrastructure propelled the so-called “Magnificent Seven” stocks and lifted the entire index. While broader market participation from European and Japanese equities contributed positively, their impact was secondary compared to the dominant performance of U.S. markets.

Premium Valuation Presents a Cautious Note

The intense focus on high-growth equities comes at a cost. The ETF’s current price-to-earnings (P/E) ratio stands above 26, a level that sits at the historically high end of the spectrum and is notably elevated compared to its long-term average. Investors are clearly paying a premium for anticipated future earnings within the technology sector.

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

This valuation leaves little margin for error should corporate profits, particularly in the AI domain, fail to meet lofty expectations in the coming year. That said, the fund’s broad diversification across 23 developed countries offers a degree of insulation against country-specific risks, even though its dependence on the U.S. economic cycle remains unmistakable.

Competitive Positioning and Fund Flows

Within the universe of global ETFs, the iShares product is positioned as a pure “developed markets” vehicle. It deliberately excludes exposure to emerging markets, distinguishing it from alternatives like the Vanguard Total World Stock ETF (VT). Although its expense ratio of 0.24% is higher than some competing funds, its substantial liquidity and precise tracking of the MSCI World Index continue to appeal to institutional investors. Net inflows over the past twelve months alone have surpassed $2.3 billion.

Looking Ahead: Key Dates and Catalysts for 2026

Future performance will hinge not only on corporate earnings but also significantly on currency movements. A weakening U.S. dollar in the new year could provide a tailwind for the fund’s non-American positions and bolster returns for international investors.

The calendar provides an immediate focal point. MSCI is scheduled to announce the results of its next quarterly index review on February 10, 2026. The resulting adjustments will take effect on March 2 and are likely to generate short-term portfolio activity and increased trading volume.