Moat Strategies Join Tech-Led April Rebound

Key Takeaways:

• Moat Index gained 3.87%, lagging as underweight to tech hurt during a narrow rally.
• Semiconductor holdings led performance, with NXP, Broadcom, and NVIDIA driving gains.
• SMID Moat Index rose 6.18%, trailing small- and mid-cap benchmarks despite tech strength.
• SMID Moat leaders included Marvell, NXP, and ON Semiconductor, supported by AI demand.

Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

Fair value estimates and price targets referenced herein are those of Morningstar's equity research team, are subject to change without notice, and do not constitute recommendations or investment advice.

U.S. equity markets staged a sharp recovery in April, reversing much of the prior month’s geopolitical-driven decline. The S&P 500 gained 10.49% as a holding ceasefire in the U.S.-Iran conflict, falling oil prices, and resilient first-quarter earnings combined to lift sentiment. Market leadership was decidedly narrow, with the cap-weighted S&P 500 outpacing the S&P 500 Equal Weight Index by more than four percentage points and the Nasdaq Composite gaining more than 15%. Technology led sectors decisively, supported by continued investor enthusiasm around artificial intelligence (AI) infrastructure spending, while health care and energy were the lone sector laggards. Energy reversed sharply after leading in March, when supply disruption fears had driven prices higher. The Federal Reserve held rates unchanged for a third consecutive meeting amid still-elevated geopolitical uncertainty.

The Morningstar Wide Moat Focus Index (the “Moat Index”) gained 3.87% in April, trailing the S&P 500 during a narrow, tech-led rebound. The Index was up approximately 6% by mid-month before fading in the final week as leadership narrowed further. Both sector allocation and stock selection weighed on relative performance, with selection the larger drag. The strategy’s underweight to information technology, the month’s leading sector, and overweight to health care, one of the few sector laggards, both pressured allocation. The Index’s equal-weighted construction also worked against it during a month in which mega-cap technology and semiconductor names drove a substantial share of the broader market’s gains. The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 6.18% in April, trailing both the S&P MidCap 400, which gained 7.86%, and the S&P SmallCap 600, which advanced 10.41%. Smaller-cap stocks broadly outperformed large-caps during the month, in a reversal of the narrow leadership pattern observed in broader market benchmarks. Both allocation and selection effects were modestly negative on relative performance, with the strategy’s overweight to health care and materials, both of which lagged broader benchmarks, and underweight to industrials weighing on results. Strong contributions from semiconductor holdings provided meaningful support, helping offset weakness elsewhere in the portfolio.

Tech-Led Rebound Lifts Equities in April

Source: Morningstar. Data as of 4/30/2026. Past performance is no guarantee of future results. Index performance is not representative of fund performance. It is not possible to invest directly in an index. Please see index definitions and other important disclosures at the end of this content. Fund performance current to the most recent month end is available by visiting vaneck.com or by calling 800.826.2333.

Moat Index Highlights: Semiconductor Strength Amid Narrow Rally

April was a challenging month for the Moat Index relative to the S&P 500, with both sector allocation and stock selection contributing to the shortfall. The strategy’s underweight to information technology, the month’s strongest sector, and its overweight to health care, one of the few sector laggards, weighed on relative performance. Even so, the Index was supported by a concentration of strong contributions from semiconductor names that capitalized on the ongoing AI infrastructure spending.

NXP Semiconductors NV (NXPI), Broadcom Inc. (AVGO), and NVIDIA Corp. (NVDA) were the leading contributors to Moat Index performance during the month, collectively reflecting renewed enthusiasm around AI and data center spending. NXP shares advanced approximately 49% following first-quarter earnings results that exceeded expectations, with a strong outlook driven by expanding data center exposure and a cyclical recovery in automotive and industrial chip demand. Morningstar raised its fair value estimate for NXP to $310 per share and continues to view shares as undervalued, with the company’s wide moat supported by intangible assets in analog and mixed-signal chip design and switching costs in mission-critical automotive and industrial applications.

Broadcom shares rose roughly 35% on continued AI infrastructure tailwinds and remains one of Morningstar’s top semiconductor picks, trading meaningfully below its $500 fair value estimate. The company’s wide moat is underpinned by intangible assets in chip design and switching costs across its enterprise software portfolio.

NVIDIA, added to the Moat Index at the March quarterly review at attractive valuations, extended its gains as the data center business and broader AI infrastructure buildout continue to drive growth. Morningstar continues to view NVIDIA’s leadership in AI GPUs and its proprietary CUDA software platform as central to the company’s wide moat, supported by intangible assets and high customer switching costs.

Masco Corp. (MAS), a manufacturer of plumbing fixtures and architectural coatings, was the second-largest contributor to Moat Index performance, with shares rising approximately 19%. The company reported strong quarterly earnings results in late April that exceeded expectations, with adjusted earnings per share growing 20% and management reiterating full-year guidance. Investors responded favorably to signs of incremental improvement in the U.S. repair and remodel market and to management’s credible plan for mitigating tariff costs. Morningstar continues to view Masco’s wide moat as supported by intangible assets in its plumbing brands, including Delta and Hansgrohe, and by an exclusive distribution relationship with Home Depot for the Behr paint brand, which provides a meaningful cost advantage. Shares continue to trade modestly below Morningstar’s $88 fair value estimate.

Companies detracting the most from Moat Index performance reflected the rotation away from defensive and quality cyclical names that characterized the month’s risk-on tone. Nike Inc. (NKE), the global athletic apparel and footwear company, was the largest detractor. GE HealthCare Technologies Inc. (GEHC), a medical technology company; Northrop Grumman Corp. (NOC), a defense contractor; Zimmer Biomet Holdings Inc. (ZBH), a medical device company specializing in orthopedic implants; and The Hershey Co. (HSY), a confectionery and snack food company, also weighed on results. Health care and consumer staples were among the few sector areas that posted negative or muted returns during the month, amplifying the relative impact of the Index’s defensive overweights.

Moat Index Top Contributors and Detractors - April 2026

Contributors

Detractors

Source: Morningstar. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

SMID Moat Index Highlights: Semiconductors Lead in Tech-Led Rebound

The SMID Moat Index also benefited from significant contributions among semiconductor holdings during the month, although stock selection and allocation effects detracted modestly on a relative basis. The strategy’s overweight to health care and materials, both of which lagged broader benchmarks, and underweight to industrials weighed on results. Even so, the breadth of strong gains within the Index’s technology holdings provided a meaningful tailwind aligned with the broader market’s tech-led rebound.

Marvell Technology Inc. (MRVL), NXP Semiconductors NV (NXPI), and ON Semiconductor Corp. (ON) were the top contributors to SMID Moat Index performance, mirroring the broader semiconductor strength observed at the Moat Index level. Marvell led contributions, with shares advancing roughly 67%. The stock benefited from reports that Marvell is working on two custom AI chips for Google, which the market interpreted as further validation of the company’s growing custom silicon pipeline alongside existing wins with Amazon Web Services and Microsoft. Morningstar views Marvell’s narrow moat as supported by intangible assets in networking chip design and switching costs from deep customer integration. ON Semiconductor shares rose roughly 63%, supported by signs that the cyclical recovery in automotive and industrial chip demand is gaining traction alongside continued investment in data center power applications. Morningstar assigns ON Semiconductor a narrow moat based on a cost advantage in power discretes and intangible assets in its image sensor portfolio, where the company holds the largest share of the automotive market. NXP Semiconductors also contributed meaningfully on the same earnings-driven catalyst that lifted shares within the Moat Index.

Etsy Inc. (ETSY) was another notable contributor, with shares advancing approximately 29%. The company reported quarterly earnings results at the end of April that showed signs of stabilization in its core artisan marketplace, including the first quarter of sequential gross merchandise sales growth in over two years and a meaningful expansion in operating margins. Investors responded favorably to evidence that management’s strategic reset, which includes refocusing on the core marketplace following the divestitures of Reverb and Depop and ongoing investments in AI-driven search and a refined mobile experience, is bearing fruit. Morningstar views Etsy’s narrow moat as supported by a powerful two-sided marketplace network effect within the unique handmade and vintage goods vertical.

Companies detracting the most from SMID Moat Index performance were concentrated within health care, with three of the bottom five detractors falling within the sector. GE HealthCare Technologies Inc. (GEHC), Zimmer Biomet Holdings Inc. (ZBH), and Insulet Corp. (PODD), an insulin pump manufacturer, all declined as the broader rotation toward technology and risk-on sectors weighed on the health care complex. Akamai Technologies Inc. (AKAM), a content delivery and cybersecurity company, was the only technology name among the detractors despite the sector’s overall strength, while Nike Inc. (NKE) rounded out the bottom five. The concentration among health care detractors aligned with the sector’s broadly weak performance during the month.

SMID Moat Index Top Contributors and Detractors - April 2026

Contributors

Detractors

Source: Morningstar. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

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