• The S&P 500 declined 0.95% as market leadership rotated away from mega-cap tech.
• The Moat Index gained 0.29% as its equal-weighted construction benefitted from the broadening rally.
• Applied Materials and Entegris led Moat Index gains on AI-driven semiconductor equipment demand.
• The SMID Moat Index rose 1.94%, with Marvell and a Bio-Techne acquisition announcement driving gains.

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. equities turned choppy in June as market leadership rotated away from the mega-cap technology names that had carried the market to record highs. The S&P 500 declined 0.95%, weighed down by its largest constituents, even as the average stock gained and the S&P 500 Equal Weight Index rose 2.38%, a wide gap that signaled broadening participation. An early-month selloff in semiconductor and AI-related shares set the tone, and the Nasdaq Composite fell 2.75%. Sentiment shifted again at the June 17 Federal Reserve meeting, the first led by new Chair Kevin Warsh, where policymakers held rates steady but raised their inflation projections and signaled little urgency to cut. Industrials and health care led the market, while communication services and energy lagged.

The Morningstar Wide Moat Focus Index (the “Moat Index”) gained 0.29% in June, outperforming the S&P 500 as the market broadened and the mega-cap technology names that the equal-weighted Index holds at far lower concentrations than the benchmark pulled back. After trailing the S&P 500 through a stretch of narrow, technology-led gains in recent months, the Index benefited as leadership rotated toward a wider set of stocks. Sector allocation was the primary driver of the relative gain, while stock selection was a partial offset. For the second quarter, the Index gained 7.65%, trailing the S&P 500’s 15.20% advance in a period whose gains remained concentrated in the largest technology stocks.

The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 1.94% in June, trailing the S&P MidCap 400’s 3.59% gain and the S&P SmallCap 600’s 7.29% advance in a month when smaller-cap stocks broadly led the market’s rotation. The Index drew its strongest contributions from health care and technology holdings, with additional support from building products and other cyclical names. Its quality focus can lag when lower-quality, higher-beta stocks lead the small-cap market, as they did in June, though its holdings still delivered solid absolute gains. For Q2, the SMID Moat Index gained 10.64%.

Broadening Market Lifts Moat Stocks in June

Source: Morningstar. Data as of 6/30/2026. 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 Indexes Complete Their Second-Quarter Reviews

Both the Moat and SMID Moat Indexes underwent their quarterly reviews in June, refreshing each portfolio toward the most attractively priced, high-quality companies in their respective universes. Our recent blog, AI Reevaluations Shape Moat Index Turnover, covers key takeaways, and full results are available here for the Moat Index and SMID Moat Index.

Moat Index Highlights: Semis and Cybersecurity Lead a Broadening Market

June was a stronger month for the Moat Index on a relative basis, as the market broadened beyond the mega-cap technology names that had led in recent months. The Index’s equal-weighted construction, which holds those mega-caps at far lower concentrations than the benchmark, provided a tailwind as leadership rotated. Sector allocation was the primary driver of the relative gain, while strong stock selection within technology, led by semiconductor equipment and cybersecurity holdings, was partly offset by weaker selection in other areas of the portfolio.

Semiconductor-related holdings led the Index’s contributors, as investors continued to reward the companies supplying the equipment and materials behind the artificial intelligence buildout, even as some larger chipmakers pulled back. Applied Materials Inc. (AMAT), the largest supplier of wafer-fabrication equipment, advanced roughly 60% after reporting strong quarterly results and raising its growth outlook, with management pointing to accelerating demand tied to leading-edge logic, memory and advanced packaging for AI. Morningstar assigns Applied Materials a wide moat, supported by intangible assets from its industry-leading research budget and by the high switching costs embedded in its equipment and on-site service relationships. Entegris Inc. (ENTG), which supplies purification solutions and specialty materials used throughout chip fabrication, gained approximately 30% on the same AI-driven demand. Morningstar also assigns Entegris a wide moat, reflecting switching costs from its razor-and-blade consumables model and intangible assets in its proprietary purity formulations.

Cybersecurity holdings also contributed meaningfully, extending a theme that has lifted the Index in recent months, as investors increasingly treat security spending as a beneficiary, rather than a casualty, of rising AI adoption. Fortinet Inc. (FTNT) gained roughly 11% after reporting strong quarterly results and raising its full-year sales outlook, with management noting that every new AI deployment widens the corporate attack surface and increases demand for protection. Morningstar views Fortinet’s wide moat as supported by customer switching costs and a network effect that strengthens as more threat data flows across its platform. Palo Alto Networks Inc. (PANW) advanced more than 20%, helped by strong results and broad-based demand across its network, cloud and security-operations platforms. Morningstar assigns Palo Alto a wide moat, underpinned by high switching costs and a reinforcing network effect.

Companies detracting the most from Moat Index performance were also concentrated in technology, though in different corners of the sector than the month’s leaders. Where the Index’s gains came from semiconductor-equipment, materials, and cybersecurity holdings, its detractors were mega-cap platform and chip names that had led the AI trade and gave back ground as leadership rotated. Oracle Corp. (ORCL), a database and cloud-infrastructure provider, was the largest detractor as its shares gave back a portion of their recent AI-driven gains. NXP Semiconductors N.V. (NXPI), a maker of automotive and industrial chips; Microsoft Corp. (MSFT), a software and cloud-computing giant; and Broadcom Inc. (AVGO), a semiconductor and infrastructure-software company, also weighed on results, alongside The Estée Lauder Companies Inc. (EL), a prestige beauty company.

Moat Index Top Contributors and Detractors - June 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: AI Chips and an Acquisition Drive Gains

The SMID Moat Index posted a solid gain in June, with its strongest contributions coming from health care and technology holdings. A blend of AI-linked semiconductor names and company-specific catalysts, including an acquisition announcement among its health care holdings, supported performance across several sectors.

Marvell Technology Inc. (MRVL) was the top contributor, advancing roughly 45% after the company raised its long-term growth outlook and pointed to accelerating demand for its custom AI silicon and optical-connectivity chips. A repeat contributor in recent months, Marvell has been among the clearest small- and mid-cap beneficiaries of data center and AI infrastructure spending. Morningstar assigns Marvell a narrow moat, supported by intangible assets in networking-chip design and customer switching costs.

Bio-Techne Corp. (TECH), a life-sciences supplier of proteins, reagents and instruments used in biopharmaceutical and academic research, advanced roughly 37% after Merck KGaA agreed to acquire the company, sending its shares sharply higher on the announcement. Morningstar assigns Bio-Techne a narrow moat, supported by intangible assets and switching costs in its protein-sciences business, where proprietary consumables account for the bulk of revenue and its reputation for quality underpins durable pricing power.

Other notable contributors included Acuity Inc. (AYI), a lighting and building-management products company; Humana Inc. (HUM), a health insurer; and Masco Corp. (MAS), a maker of home-improvement and building products.

Companies detracting the most from the SMID Moat Index were split between technology names caught in the month’s rotation and commodity-linked cyclicals. Akamai Technologies Inc. (AKAM), a content-delivery, security and cloud-computing provider, was the largest detractor, giving back a portion of its recent gains as enthusiasm around its pivot toward AI compute cooled. Albemarle Corp. (ALB), a specialty-chemicals and lithium producer, and ON Semiconductor Corp. (ON), a maker of power and automotive chips, also weighed on results, alongside Zoom Communications Inc. (ZM), a communications-software provider, and SLB Ltd. (SLB), an oilfield-services company. The mix reflected soft commodity prices and a rotation away from some of the AI-linked technology names that had led in prior months.

SMID Moat Index Top Contributors and Detractors - June 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.

Choose Your Moat Strategy

VanEck’s suite of moat investing strategies is powered by Morningstar’s equity research team, which seeks quality companies trading at attractive valuations. The below ETFs offer access to US moat companies:

VanEck Morningstar Wide Moat ETF (MOAT): companies with a wide moat rating, which means Morningstar believes the company is likely to sustain its competitive advantage for at least the next 20 years.

VanEck Morningstar SMID Moat ETF (SMOT): small and mid-cap moat companies.

VanEck Morningstar Wide Moat Value ETF (MVAL): wide moat companies within Morningstar’s value style category.

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• Weather forecasting sits at the federal level, funded through NOAA and the National Weather Service on a budget of roughly $6.6 billion.
• There is no line item called “weather forecasting” in a state budget. The cost is spread across emergency management, transportation, utilities, and water agencies.
• It is a national effort that flows down to state and local governments, who service their residents against winter storms, hurricanes, agriculture, and drinking water.

Welcome back to The Muni Brief, a series on municipal credit and markets. In each installment, Senior Municipal Strategist James Colby examines current events, policy developments, and fiscal trends through the lens of the muni investor, covering topics both local and national.

What's the Weather Going to Be?

Everyone wants to know: what's the weather going to be? It is the most ordinary question there is. Yet the answer runs through one of the more layered pieces of public finance in the country. From the extreme to the sublime, from the moment-to-moment pinpointing of dangerous events to the recognition of multi-decade trends impacting the survival and sustainability of millions, societies require a real commitment to managing weather outcomes. Just how we do it here in America combines both public finance and science.

There Is No Line Item for the Weather

Weather is, as the broadcast stations like to say, hyper-local. But its impact can be Continental. Look through any state budget and you will not find a heading that reads “weather forecasting.” The spending is real, but it is scattered. It lives inside emergency management agencies, departments of transportation, utilities, and water resource agencies, and it changes shape depending on what a given state actually has to worry about.

Most states also fund a Climatological Service Office. Wyoming is the exception. These offices are not federally mandated. Each one is created and paid for by the state itself or by a host institution, usually a land-grant university. Consequently, the economic characteristics of each state can vary the mandate. A smaller state might run a lean analytical team on less than $1 million a year. A large, exposed state might operate several sizable climate offices. Their job is to capture data and turn it into recommendations their constituent municipalities can use, on risks such as winter storms and transportation, flooding, utility strain, hurricanes, wildfires, agriculture, and drinking water for major metro populations.

Forecasting Is Federal. Acting on It Is Local.

Here is the part that matters. The primary forecasting responsibility does not sit with the states at all. It sits with the National Weather Service, which is funded through the National Oceanic and Atmospheric Administration (NOAA) on a combined budget of roughly $6.6 billion a year. That money buys serious hardware: ships, planes, satellites, and supercomputers. It is a national resource, and it produces the local and national outlooks the whole system runs on.

From there, the information flows downhill. NOAA and the National Weather Service feed data to state emergency management agencies, transportation departments, utilities, and water resource agencies. The federal government generates the forecast. The states and localities are the ones who staff the response, harden the infrastructure, and write the checks when a storm arrives. It also connects to the bigger conversations we keep coming back to such as infrastructure, sustainability, and electrification which depends on knowing what the weather is going to do.

Final Thoughts

So, when the question is asked, what's the weather going to be, the answer comes from the contributions of many sources at once. A federal agency does the forecasting. State offices translate it. Local agencies act on it. It is worth appreciating just how much goes on behind the scenes of a question that simple. And, for the muni investor, how much of that quiet machinery sits inside the state and local budgets you underwrite every single day.

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This belief led us to develop the actively managed TruSector ETFs, a new approach to sector investing that seeks to deliver more accurate representative exposure to the stocks in each sector that drive long-term performance, including:

• VanEck Technology TruSector ETF (TRUT)
• VanEck Consumer Discretionary TruSector ETF (TRUD)
• VanEck Communications Services TruSector ETF (TRUC)
• VanEck Financials TruSector ETF (TRUF)
• VanEck Healthcare TruSector ETF (TRUH)
• VanEck Consumer Staples TruSector ETF (TRUO)
• VanEck Industrials TruSector ETF (TRUI)
• VanEck Energy TruSector ETF (TRUN)
• VanEck Utilities TruSector ETF (TRUU)
• VanEck Real Estate TruSector ETF (TRUR)
• VanEck Materials TruSector ETF (TRUM)

It’s Time for a New Approach to Sector Investing

Over the past decade, concentration has intensified, especially in areas like the technology and consumer discretionary sectors. A handful of companies now account for a growing share of total performance in each sector, yet most traditional sector ETFs are subject to structural constraints that limit their ability to reflect this reality.

This disconnect has led to two persistent challenges:

1. Underrepresentation of dominant companies
2. Distorted tracking relative to uncapped benchmarks

Capping Weights of Top Constituents Creates Unintended Overweights

Source: Factset. As of 12/31/2025. Index holdings and performance are not illustrative of fund holdings or performance. It is not possible to invest directly in an index.

Source: FactSet as of 06/30/2025. Index holdings are not illustrative of fund holdings. Not intended as a recommendation to buy or sell any names referenced herein. Fund holdings may vary. Visit vaneck.com/trud or vaneck.com/trut for most recent complete holdings information. Please see index definitions below.

Source: Factset. As of 12/31/2025. Index holdings and performance are not illustrative of fund holdings or performance. It is not possible to invest directly in an index.

Rather than trying to retrofit older tools into a new environment, we chose to start fresh with a strategy built for real-world market dynamics and forward-looking portfolio construction.

The Principles Behind TruSector

TruSector ETFs are grounded in a few simple but powerful principles:

• Economic Accuracy: We aim to reflect the market as it exists, not as regulations might artificially force it, while still complying with diversification rules.
• Strategic Flexibility: Our team can adjust to changing sector landscapes rather than locking into static weights.
• ETF Simplicity: Despite the innovation inside, TruSector ETFs are designed to be familiar, transparent, and easy to use, like any other ETF.

Sector Exposure Built with Allocators in Mind

Whether you are constructing models or refining tactical views, clean sector exposure matters. With TruSector ETFs, we aim to give portfolio builders a more precise tool set, reducing unintended tilts and performance drift that can come from traditional ETFs.

This is not about chasing benchmarks. It is about giving investors access to sectors in a way that is aligned with how the market actually exists.

Variance in Weights Creates Difference in Performance

Source: Morningstar, Data as of 12/31/2025.
Index performance is not fund performance. TruSector ETFs may not replicate the differential shown. The uncapped approach can also underperform.

Starting with Tech and Consumer Discretionary

We launched the TruSector suite with three of the most structurally distorted sectors:

• Information Technology (TRUT)
• Consumer Discretionary (TRUD)
• Communications Services (TRUC)

These sectors are increasingly dominated by large firms that traditional ETFs often underweight. TruSector is designed to better reflect these realities.

Expanding into Financials and Healthcare

When investors make a sector call, the precision of that exposure matters. Regulated investment company (RIC) diversification rules can force traditional sector ETFs to underweight their largest holdings, creating a gap between the intended exposure and what the fund delivers.

VanEck’s TruSector ETFs close that gap. The suite includes eleven actively managed ETFs covering Information Technology (TRUT), Consumer Discretionary (TRUD), Communication Services (TRUC), Financials (TRUF), Healthcare (TRUH), Industrials (TRUI), Consumer Staples (TRUO), Energy (TRUN), Utilities (TRUU), Real Estate (TRUR), and Materials (TRUM).

TruSector builds on VanEck’s legacy of staying ahead of structural shifts in markets and rethinking what’s possible in investing. It brings a modern approach to sector exposure, designed to help investors strengthen their core portfolios.

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• What are VanEck TruSector ETFs?
• What differentiates TruSector ETFs from other sector ETFs?
• Why are sector weightings so distorted in other ETFs?
• How do TruSector ETFs provide full sector exposure while adhering to regulatory rules?
• What investment needs are TruSector ETFs designed to address?
• Who are these funds designed for?
• How do regulated investment company (RIC) diversification rules impact traditional S&P 500 ETFs?
• Are TruSector ETFs more expensive than traditional sector ETFs?
• Which sectors are most affected by capped weighting rules?
• Why introduce new sector ETFs when the market already has so many options?
• How does TruSectors determine which ETFs to hold within each sector?

What are VanEck TruSector ETFs?

VanEck TruSector ETFs are a suite of sector-focused exchange-traded funds, actively managed to reflect the full economic composition of each market segment. The current offerings include Information Technology (TRUT), Consumer Discretionary (TRUD), Communications Services (TRUC), Financials (TRUF), Healthcare (TRUH), Consumer Staples (TRUO), Industrials (TRUI), Energy (TRUN), Utilities (TRUU), Real Estate (TRUR), and Materials (TRUM) sectors. VanEck may consider additional sector exposures over time as part of a broader expansion of this suite.

What differentiates TruSector ETFs from other sector ETFs?

Many existing sector ETFs are built to track indices that are designed to comply with regulatory diversification limits. These rules often reduce exposure to the largest and most influential companies within a sector, leading to allocations and performance that may differ meaningfully from the sector’s actual market composition.

TruSector ETFs are constructed to maintain a closer alignment to the complete market-cap structure of each sector, while still adhering to applicable regulatory requirements. The investment team applies a rules-based quantitative approach to build portfolios that reflect their outlook on the sector’s makeup and performance drivers.

Why are sector weightings so distorted in other ETFs?

Typically, regulatory requirements mandate that an ETF’s allocation to a single company can be no more than 25% or more than 50% total to companies that individually exceed 5%. In concentrated sectors like Information Technology, this leads to forced reductions in industry leaders, which can collectively make up over 40% of the sector.

This misalignment can result in performance deviations compared to uncapped benchmarks and can dilute the actual sector exposure investors are seeking.

How do TruSector ETFs provide full sector exposure while adhering to regulatory rules?

The investment team uses a hybrid portfolio construction process that blends individual equities¹ with ETF exposures. This structure is intended to provide more complete sector representation, reduce tracking error to uncapped sector benchmarks, and limit unintended biases that may arise in traditional sector ETFs.

What investment needs are TruSector ETFs designed to address?

As sectors become more concentrated, particularly in areas like technology, traditional ETF structures may increasingly diverge from actual market realities due to regulatory caps. TruSector ETFs are designed to offer a more comprehensive and adaptable approach to sector investing, while maintaining the operational simplicity and liquidity that ETF investors expect.

Who are these funds designed for?

TruSector ETFs are ideal for:

• Asset allocators seeking benchmark-aligned sector exposure
• Model portfolio builders looking to reduce performance drift and improve attribution
• Investors wanting true sector exposure without hidden biases or overly forced diversification

How do RIC diversification rules impact traditional S&P 500 ETFs?

Most index ETFs, including those tracking the S&P 500, are structured as Regulated Investment Companies (RICs), which must comply with diversification requirements set by the IRS. These rules limit the weight any single company can represent within a fund. While this ensures diversification from a tax perspective, it also prevents ETFs from reflecting true market-cap weightings. As a result, investors in traditional S&P 500 or sector ETFs may not realize that their exposure to the largest market leaders is often reduced due to regulatory capping.

Are TruSector ETFs more expensive than traditional sector ETFs?

TruSector ETFs are designed to remain cost-competitive with traditional sector funds. The objective is not to increase costs but to improve accuracy, giving investors a more authentic view of sector performance through true market-cap representation, all while maintaining low, transparent fees.

Which sectors are most affected by capped weighting rules?

Capped methodologies tend to distort sectors dominated by a few large companies. Technology, communication services, and energy are prime examples, areas where the largest firms drive a significant share of the sector’s market capitalization and earnings power. Capping these companies can dilute exposure and lead to performance differences relative to the true, uncapped market.

Why introduce new sector ETFs when the market already has so many options?

While sector ETFs are well established, most of them rely on capped index methodologies that deviate from actual market-cap representation. TruSectors was developed to offer a more precise alternative, one that tracks each sector as it truly exists in the marketplace. This approach allows investors to align more closely with the real composition and performance of each sector rather than a modified version of it.

How does TruSectors determine which ETFs to hold within each sector?

Each TruSector ETF is constructed to mirror its sector’s true market-cap structure as accurately as possible. When multiple ETFs represent the same sector, the methodology prioritizes those that offer the most representative exposure, typically defined by liquidity, depth of holdings, and alignment with the sector’s overall market capitalization profile.

How Can Investors Buy VanEck’s TruSector ETFs?

VanEcks ETFs can be purchased the same way you would by a stock, through a broker or with your advisor.

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• Traditional sector ETFs may underweight mega-cap leaders due to diversification caps.
• The TRUC ETF seeks to replicate true market-cap Communication Services exposure through a hybrid structure designed to reflect today’s market realities.
• By combining direct holdings and targeted ETF exposure, TRUC helps reduce artificial weighting distortions.

The VanEck Communication Services TruSector ETF (TRUC) offers investors a new way to gain true market-cap exposure to the Communication Services sector.

The Problem: Traditional Sector ETFs Can Fall Short

In today’s market, a small number of mega-cap companies often dominate the performance of their sectors. Yet many traditional sector ETFs are structurally unable to mirror those market realities because of regulatory diversification rules that govern most U.S. ETFs. These rules:

• Cap any single holding at 25% of a fund’s assets.
• Limit the total weight of names above 5% to no more than 50% of the portfolio.

While designed to protect investors from concentration risk, these limits can force traditional sector funds to underweight the largest companies that drive performance and overweight smaller names to stay compliant, creating a mismatch between what investors think they own and what they actually hold.

Our Solution: TruSector ETF Structure

VanEck’s TruSector ETF suite addresses this challenge by delivering full market-cap sector exposure while remaining compliant with ETF diversification rules. The TruSector approach uses a hybrid structure that combines:

• Direct equity holdings in individual sector stocks up to regulatory limits.
• Positions in targeted sector ETFs for incremental exposure that does not count toward issuer concentration caps.

This structure allows TRUC to replicate the economic exposure of an uncapped sector benchmark — giving investors exposure to today’s true market leaders in Communication Services, without artificial weighting distortions.

Why the TRUC ETF Matters

With the launch of TRUC, investors and allocators now have a new precision tool for expressing a view on the Communication Services sector, one that:

• Aligns more closely with actual market-cap weights.
• Reduces unintended tracking differences relative to traditional sector funds.
• Fits seamlessly within diversified portfolios.

TRUC joins VanEck’s growing TruSector lineup, built to bring clarity and accuracy to sector investing in an evolving market environment.

Choose Your TruSector Strategy

When investors make a sector call, the precision of that exposure matters. RIC diversification rules can force traditional sector ETFs to underweight their largest holdings, creating a gap between the intended exposure and what the fund delivers.

VanEck’s TruSector ETFs close that gap. The suite includes eleven actively managed ETFs covering Information Technology (TRUT), Consumer Discretionary (TRUD), Communication Services (TRUC), Financials (TRUF), Healthcare (TRUH), Industrials (TRUI), Consumer Staples (TRUO), Energy (TRUN), Utilities (TRUU), Real Estate (TRUR), and Materials (TRUM). Each uses a hybrid structure that delivers full market-cap sector exposure while staying RIC-compliant. Whether sector investing is your primary strategy or a tactical complement to a style-based core, TruSector ETFs deliver the exposure you actually intend.

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• Sector investing targets specific industries and is driven by macro themes. Style investing targets company characteristics like value or growth across the broader market.
• The two approaches serve different roles but can complement each other within a diversified portfolio.
• When using sector ETFs, precision matters. TruSector ETFs are built to deliver full market-cap sector weights where RIC caps can otherwise dilute exposure.

What Is Sector Investing?

Sector investing means allocating to a specific industry or segment of the economy, such as Technology, Healthcare, or Financials. Returns are driven primarily by industry-level dynamics: regulatory shifts, innovation cycles, commodity prices, or changes in consumer behavior. Because exposure is concentrated in one area, sector investing gives investors a direct way to express a macro view or position around a specific theme.

What Is Style Investing?

Style investing allocates based on company characteristics rather than industry membership. The most common styles are growth and value, but the category also includes factors like momentum, quality, and low volatility. Because style funds draw from across the market, they tend to be more diversified at the sector level but more concentrated along a specific factor.

How Do Sector and Style Investing Differ?

When Does Sector Investing Make Sense?

Sector investing is most useful when an investor has a view on a specific part of the economy. If you believe AI-driven capital spending will accelerate, overweighting Technology expresses that directly. It also serves as a risk management tool, since adjusting sector weights is one of the most intuitive ways to manage where a portfolio is exposed and where it’s vulnerable. Sector ETFs can also facilitate tax-loss harvesting, since an investor can sell one sector fund at a loss and replace it with a similar, but not substantially identical, fund to maintain exposure while realizing the tax benefit.

When Does Style Investing Make Sense?

Style investing works well when the goal is to tilt toward a long-term factor premium without concentrating in a single industry. It’s also effective for smoothing sector-level volatility, since style funds hold companies across multiple industries and tend to be less sensitive to any one sector’s movements.

Can You Combine Sector and Style Investing?

Many allocators do. A common approach is to use style-based funds as the portfolio’s core while layering in sector ETFs as tactical overlays to express macro views or manage specific risks. The two complement each other precisely because they operate on different axes: one targets how companies behave, the other targets where in the economy they sit.

How VanEck Approaches Sector and Style Investing

When investors make a sector call, the precision of that exposure matters. RIC diversification rules can force traditional sector ETFs to underweight their largest holdings, creating a gap between the intended exposure and what the fund delivers.

VanEck’s TruSector ETFs close that gap. The suite includes eleven actively managed ETFs covering Information Technology (TRUT), Consumer Discretionary (TRUD), Communication Services (TRUC), Financials (TRUF), Healthcare (TRUH), Industrials (TRUI), Consumer Staples (TRUO), Energy (TRUN), Utilities (TRUU), Real Estate (TRUR), and Materials (TRUM). Each uses a hybrid structure that delivers full market-cap sector exposure while staying RIC-compliant. Whether sector investing is your primary strategy or a tactical complement to a style-based core, TruSector ETFs deliver the exposure you actually intend.

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• Regulatory requirements can limit how closely a sector fund tracks its benchmark, creating exposure gaps that compound across a portfolio.
• RIC diversification caps don’t eliminate concentration risk. They redistribute it, often shifting exposure away from sector leaders and toward smaller names.
• TruSector ETFs use a hybrid structure to deliver full market-cap sector exposure while remaining RIC-compliant, giving allocators more precise risk control.

Why Sector Allocation Is a Risk Management Tool

Each sector carries a distinct risk fingerprint. Technology is sensitive to interest rate expectations and valuation compression. Financials respond to credit cycles and yield curve dynamics. Healthcare faces regulatory and patent cliff risks. When investors allocate across sectors, they’re deciding which risks to take on, which to hedge, and how to diversify across fundamentally different drivers.

The precision of this risk management depends entirely on what’s inside each sector fund. If a fund doesn’t accurately represent the sector it tracks, the risk exposure may differ from what the investor intended.

How Does Concentration Risk Build Up in Sector Portfolios?

A small number of mega-cap companies now dominate many sectors, commanding outsized shares of both market capitalization and returns. In Information Technology, names like NVIDIA, Apple, and Microsoft represent a significant portion of the sector’s total weight. In Consumer Discretionary, Amazon and Tesla are the clear leaders. In Communication Services, Alphabet and Meta drive the majority of performance.

This concentration reflects genuine economic reality. These companies have earned their dominance through sustained growth and competitive advantages. The question for investors is whether their sector funds can hold these companies at their true market weight.

Most sector ETFs are structured as Registered Investment Companies (RICs), which must comply with diversification requirements under the Internal Revenue Code. No single company can exceed 25% of a fund’s total assets, and all positions above 5% cannot exceed 50% of the fund in aggregate. Index providers typically impose even stricter internal limits to build in a buffer against breaching these thresholds.

When the largest companies in a sector grow beyond these caps, the fund must trim their weight and redistribute it elsewhere. The portfolio ends up overweighting smaller names relative to the actual market, introducing stock-level biases that compound over time.

What Is the Hidden Risk in Capped Sector Funds?

When a sector ETF underweights its largest constituent, the excess weight flows to smaller holdings. The fund systematically tilts away from the companies that most define the sector’s risk profile and toward names with different fundamental characteristics, volatility patterns, and correlation structures.

For asset allocators, this creates a compounding problem. If each sector sleeve is slightly misaligned with its benchmark, the aggregate portfolio may carry unintended factor tilts. Over time, these misalignments can potentially generate tracking error between the fund’s returns and the sector it’s supposed to represent.

How Do Sector Weights Affect Overall Portfolio Risk?

In each case, the companies that most define the sector’s behavior are the ones being systematically underweighted. For portfolio managers using sector allocation as a risk tool, this undermines the precision they need. This matters most during periods of rapid rotation, when the largest names often lead the move and a capped fund may respond differently than the sector itself.

True Market-Cap Exposure as a Sector Risk Management Solution

If the goal is to own a precise slice of the market’s risk, the answer is to hold each sector’s constituents at their true market-cap weight. This aligns the fund’s risk profile with the actual sector, ensuring the companies driving performance are represented in proportion to their real economic footprint.

The challenge is doing this within the boundaries of RIC diversification rules. Any solution must achieve the economic exposure of an uncapped benchmark while remaining fully compliant.

How Do TruSector ETFs Deliver More Precise Sector Risk Management?

VanEck’s TruSector ETFs were designed to address this challenge. The suite includes eleven actively managed ETFs covering Information Technology (TRUT), Consumer Discretionary (TRUD), Communication Services (TRUC), Financials (TRUF), Healthcare (TRUH), Industrials (TRUI), Consumer Staples (TRUO), Energy (TRUN), Utilities (TRUU), Real Estate (TRUR), and Materials (TRUM), each built to deliver full market-cap sector exposure while staying RIC-compliant.

The approach uses a hybrid structure. Each TruSector ETF directly holds equities from its target sector up to the maximum allowed under RIC rules. If those caps are reached, the fund can allocate remaining exposure through other sector ETFs that already hold the same mega-cap names. Because RIC rules don’t look through to the underlying holdings of other RICs, those supplemental positions don’t count toward issuer concentration limits.

For asset allocators and model portfolio managers, this means tighter tracking relative to widely followed benchmarks, reduced unintended factor tilts, and sector sleeves that behave the way the market says they should. When sector allocation is a risk management tool, the precision of your exposure is the precision of your risk control.

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• Each sector has distinct return drivers, macro sensitivities, and portfolio roles that advisors can use to align allocations with client objectives.
• Regulated investment company (RIC) diversification caps can force sector ETFs to underweight their largest holdings, creating a gap between intended and actual exposure.
• TruSector ETFs are built to deliver full market-cap sector exposure while staying RIC-compliant, giving advisors more precise building blocks.

How to Use This Sector Cheat Sheet

This guide gives advisors a fast, practical reference for sector-level portfolio decisions. Each sector is broken down by its primary return drivers, macro sensitivity, typical portfolio role, and the degree to which RIC caps may affect exposure in traditional sector ETFs.

A regulated investment company (RIC) is a fund taxed under federal rules that require it to limit how concentrated it can be in its largest holdings. Those diversification limits are what this article refers to as RIC caps.

Use it alongside your own research to identify where sector tilts may add value or where current exposures may not reflect your intended risk profile. Some investors replicate the whole S&P 500 using sector ETFs to allow them to tax loss harvest at the individual sector level, rather than holding SPY (for example) which doesn't give the precision of that flexibility.

Sector Snapshot: Key Drivers, Macro Sensitivity, and ETF Solutions by Sector

When Should Advisors Overweight or Underweight a Sector?

Sector tilts should reflect a deliberate macro view, not a byproduct of fund construction. Overweighting typically signals conviction in near-term drivers, like tilting toward Technology amid AI-related capital spending or favoring Financials ahead of a steepening yield curve.

Underweighting works in reverse. If consumer spending is slowing, reducing Consumer Discretionary can manage downside risk. Healthcare can serve as a defensive counterweight during broader uncertainty. The key is ensuring the funds in your portfolio actually deliver the exposure you expect.

What Is the Regulated Investment Company (RIC) Cap Problem and Why Does It Matter for Sector ETFs?

Most sector ETFs must meet RIC diversification tests: no single company can exceed 25% of fund assets, and all positions above 5% cannot exceed 50% in aggregate. In sectors dominated by a few mega-caps, these caps force the fund to trim its largest holdings and redistribute weight to smaller names.

For advisors, this introduces tracking error relative to sector benchmarks and can create unintended tilts across a multi-sector portfolio.

Why Is Sector Investing Important in Portfolios?

Sectors are one of the most intuitive ways to express a market view. Each sector responds to different economic forces, giving advisors a direct lever for managing risk and capturing cyclical opportunities.

Unlike factor-based approaches, sector investing maps cleanly to the real economy. Clients can understand why they own Technology or Healthcare in a way that’s harder to explain with momentum or low-volatility tilts, making it a practical tool for both portfolio construction and client communication.

How Can Advisors Explain Sector Investing to Clients?

The simplest framing: sectors represent different parts of the economy, and each part responds differently to what’s happening in the world. When rates rise, banks tend to benefit. When consumers are confident, retailers gain. When innovation accelerates, technology leads.

Positioning sector allocation as intentional exposure, rather than leaving everything to a broad index, builds trust and reinforces the value of active portfolio management.

How Do TruSector ETFs Give Advisors True Sector Exposure?

VanEck’s TruSector ETFs are designed to close the structural gap created by RIC caps. The suite includes eleven actively managed ETFs: Information Technology (TRUT), Consumer Discretionary (TRUD), Communication Services (TRUC), Financials (TRUF), and Healthcare (TRUH), Industrials (TRUI), Consumer Staples (TRUO), Energy (TRUN), Utilities (TRUU), Real Estate (TRUR), and Materials (TRUM).

Each fund can utilize a hybrid structure combining direct equity holdings with supplemental positions in other sector ETFs, allowing it to reflect the full market-cap weight of each sector’s largest constituents while staying RIC-compliant. For advisors, this means tighter benchmark tracking, fewer unintended tilts, and sector sleeves that deliver exactly the exposure you intend.

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• Traditional sector ETFs cap their largest holdings, resulting in diluted exposure to the sector.
• True-weight exposure reflects the sector as the market actually weights it.
• VanEck’s TruSector suite covers all 11 GICS sectors of the U.S. equity market under a consistent, uncapped framework.
• The complete suite makes sector rotation, tilts and overweights cleaner to execute.

Traditional sector ETFs are built around rules that cap exposure to the biggest names in a given sector. On paper, that may sound like prudent diversification. In practice, it can produce a portfolio that doesn’t reflect where the weight and the growth in that sector actually live. This means that an investor buys a sector fund expecting exposure to the sector but ends up with a diluted version of it, with the leaders trimmed back and the exposure spread thinner than the market itself.

For years, sector investors faced the same tradeoff with each allocation: accept a capped-down version of the sector or look elsewhere for the exposure they wanted. VanEck’s suite of TruSector ETFs was designed to eliminate that tradeoff.

Each TruSector ETF is actively managed using a hybrid construction process that combines individual equity holdings with ETF exposures. This allows the funds to maintain close alignment with the full market-cap weight of each sector, including its largest constituents, while still meeting applicable regulatory requirements. The result is sector exposure that reflects how each sector actually exists in the market, not a modified version of it shaped by diversification caps.

Now that the TruSector suite is complete, investors no longer have to check whether one sector’s fund is watering down its largest holdings while another isn’t. Neither do they have to mix true-weight exposure in sectors with cap-constrained exposure in others to fill out a portfolio’s target allocation. Every ETF in the suite applies the same philosophy to each sector, so the exposures line up and comparisons across sectors are apples to apples.

That’s what a complete toolkit unlocks. Sector rotation, tactical tilts, overweights and underweights all become cleaner when every building block is constructed the same way.

TruSector ETF Suite Offers Complete GICS Sector Coverage

Sector investing isn’t just about getting exposure to a single sector. No one sector outperforms the rest year in and year out, so the goal is being able to selectively allocate across the different sectors. The TruSector ETFs offer a way for investors to shift between sectors, each at its true weight, rather than piecing exposure together across providers or settling for a capped-down version of one.

VanEck’s TruSector ETF suite covers all 11 GICS sectors of the U.S. equity market:

• VanEck Communications Services TruSector ETF (TRUC)
• VanEck Consumer Discretionary TruSector ETF (TRUD)
• VanEck Consumer Staples TruSector ETF (TRUO)
• VanEck Energy TruSector ETF (TRUN)
• VanEck Financial TruSector ETF (TRUF)
• VanEck Healthcare TruSector ETF (TRUH)
• VanEck Industrials TruSector ETF (TRUI)
• VanEck Technology TruSector ETF (TRUT)
• VanEck Materials TruSector ETF (TRUM)
• VanEck Real Estate TruSector ETF (TRUR)
• VanEck Utilities TruSector ETF (TRUU)

Who Should Be Paying Attention

Advisors and investors who run sector-based strategies, whether that’s rotation, tactical tilts, or long-term structural positioning, now have a full set of tools built for that job. If you’ve ever worried that your sector exposure wasn’t really capturing the sector, the complete suite is worth a look.

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Watch Video: CLO Investor Podcast, with Laila Kollmorgen, Global Head of CLO Tranche Investing, MetLife Investment Management

Key moments from the conversation:

• CLOs standout for their loan-level transparency, which makes it possible to assess risk loan-by-loan.
• Team independently re-underwrites the underlying loans in each CLO, building its own view of the likelihood of default and expected recovery for each loan.
• Recently launched interval fund targets BBB-rated tranches down through equity, providing investors a way to reach for higher yield without the daily liquidity demands of an ETF.
• AA-BBB strategy blends easy-to-trade tranches with lower-rated ones that pay more, balancing daily liquidity needs with the pursuit of higher yield.
• CLO equity historically performs well when purchased following market drawdowns, but 2025 broke that pattern.
• Software loans are an area to watch, as AI starts to threaten the business models of some companies, raising the risk of defaults and reducing what investors recover if they happen.
• Recoveries have trended lower recently, in part due to distressed debt exchanges that often end up in default anyway.
• Broadly syndicated CLOs preferred over middle-market/private credit CLOs because of greater liquidity and transparency.
• Heavy buying from insurance companies has pushed up prices on AA/A tranches, creating relative value opportunities in junior BBBs.
• Investors rushing to pull money out of private credit and BDC interval funds underscore a structural advantage for CLOs: the ability to buy and sell easily, even in stressed markets.

How to Invest in CLOs

PineBridge sub-advises VanEck’s suite of CLO funds, drawing on the team’s decades of experience as both a CLO manager and CLO trance investor:

• VanEck CLO ETF (CLOI): provides access to investment grade floating-rate CLOs.
• VanEck AA-BB CLO ETF (CLOB): targets the mezzanine tranches of the CLO capital stack, offering enhanced yield opportunity relative to investment grade CLOs.
• VanEck CLO Opportunities Fund: an interval fund structure built to accommodate less liquid, higher-yielding parts of the CLO market, including BBB, BB and equity tranches.

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• Nuclear energy offers stable, carbon-free power critical for global electrification and AI-driven demand.
• Innovation across mining, reactors, and utilities is reshaping the nuclear energy value chain.
• Government support and new technologies are creating long-term opportunities in the nuclear sector.

As the demand for clean, reliable energy surges, nuclear power is stepping into the spotlight as a critical player in the global shift away from fossil fuels. With the ability to generate massive amounts of electricity without harmful emissions, nuclear energy offers a sustainable solution to the world’s energy needs. Unlike solar and wind, which depend on weather conditions, nuclear power provides a steady, around-the-clock energy supply that is ideal for supporting the increasingly power-hungry infrastructure of modern society and new technologies like artificial intelligence.

But nuclear energy isn’t just about the reactors we’ve seen in the past; today’s leading companies are reimagining the potential of nuclear power with new technologies like small modular reactors (SMRs), advances in nuclear fuels, and even portable microreactors. These innovations promise to make nuclear safer, more efficient, and accessible for a wider range of applications, from powering cities to remote industrial sites.

But who are the key players driving innovation in this industry? From industry stalwarts with decades of expertise to ambitious newcomers revolutionizing technology, the top nuclear energy companies are shaping a cleaner, more resilient energy landscape. Let’s dive into the leading companies at the forefront of this exciting transformation.

What are the Top Nuclear Energy Companies Leading the Industry?

When most people think about the nuclear energy industry, uranium and the companies mining the element often come to mind first. After all, uranium is the essential fuel that powers nuclear reactors, and these miners sit at the very beginning of the nuclear supply chain. From exploration to extraction, uranium mining companies are crucial players, and they have, until recently, attracted most of the attention in the space, especially from investors eager to capitalize on the rising demand for nuclear energy.

However, the nuclear industry extends well beyond uranium miners. In fact, some of the most groundbreaking innovations are happening further down the line in the Industrials and Utilities segments. Industrial companies are leading the charge in developing next-generation reactors, modular technologies, and advanced safety solutions that make nuclear power more efficient and versatile than ever. Meanwhile, Utilities play a key role in generating and distributing nuclear power to cities and industries, supporting everything from household electricity to the ever-growing needs of data centers and AI. Let’s take a closer look at the leading companies across these three segments—Uranium Miners, Industrials, and Utilities—that are shaping the future of nuclear energy. Where noted, NLR weighting figures indicate each company’s percentage weight in the VanEck Uranium and Nuclear ETF (NLR) as of June 30, 2026.

Uranium Miners

Cameco Corp. (CCJ) (8.41% of NLR assets)

One of the world’s largest uranium producers, Cameco operates high-grade mines in Canada, the United States and Kazakhstan. As global demand for nuclear energy rises, Cameco is positioned to play a key role, supplying uranium to fuel reactors around the world. The company’s commitment to sustainability and operational efficiency also sets it apart in the mining industry.

NexGen Energy (NXE) (4.97% of NLR assets)

NexGen Energy is advancing one of the largest development-stage uranium projects at the moment, the high-grade Rook I project in Canada. With plans for innovative mining and processing techniques, NexGen aims to set new standards for efficiency and environmental responsibility in uranium production.

Denison Mines Corp. (DNN) (4.77% of NLR assets)

A Canadian uranium company developing high-grade projects in the Athabasca Basin of northern Saskatchewan. Its main asset, the Wheeler River Project, includes some of the world’s richest uranium deposits and aims for low-cost, efficient production. With a stake in the McClean Lake mill and growing global demand for nuclear energy, Denison offers strong potential for investors seeking exposure to the expanding uranium market.

Nuclear Industrials

BWX Technologies (BWXT) (6.78% of NLR assets)

BWX traces its history to the 1800s and was involved in the Manhattan Project of the 1940s. Today, it specializes in nuclear components and services, with a strong focus on advanced nuclear reactors for both commercial and military applications. The company is a leader in small modular reactor technology and is also at the forefront of nuclear fuel innovation.

Oklo Inc. (OKLO) (5.22% of NLR assets)

Oklo is working on ultra-compact, micro-reactors designed to power remote locations, industrial sites, and data centers. Its advanced reactor technology uses recycled nuclear fuel, making it a sustainable solution for the future of nuclear energy, especially in areas where conventional power grids are impractical.

Centrus Energy Corp. (LEU) (5.05% of NLR assets)

Centrus Energy, a U.S.-based nuclear-fuel supplier, provides low-enriched uranium (LEU) and is developing high-assay, low-enriched uranium (HALEU) for advanced reactors. Headquartered in Bethesda, Maryland, it operates enrichment and technical-services facilities, including a key plant in Piketon, Ohio. With global demand for clean, reliable nuclear power rising and new reactor designs in development, Centrus stands out as an investment opportunity thanks to its role in the fuel-supply chain, domestic manufacturing capability, and positioning in a strategic growth market.

X-Energy Inc. (XE) (2.39% of NLR assets)

X-Energy develops advanced small modular reactors (SMRs) and nuclear fuel technology, focusing on delivering safe, carbon-free power for industrial and commercial applications. Its flagship Xe-100 reactor takes away the need for large containment structures by using proprietary TRISO-X fuel to minimize the risk of fuel failure. With backing from Amazon and support from the U.S. Department of Energy, X-Energy recently went public in a $1.02 billion IPO, and is developing more than 11 gigawatts of new nuclear capacity across the U.S. and U.K.

Nuclear Utilities

Constellation Energy Corp. (CEG) (8.04% of NLR assets)

As the largest producer of carbon-free energy in the United States, Constellation Energy operates a fleet of nuclear plants that supply reliable, emissions-free electricity. Constellation is actively exploring partnerships to support next-generation nuclear technologies, as well as agreements to power datacenters for large technology companies like Microsoft.

Public Service Enterprise Group (PEG) (7.09% of NLR assets)

PEG owns and operates nuclear plants in the U.S. as part of its commitment to a low-carbon future. By investing in nuclear as a core part of its energy mix, PEG is helping meet regional power demands while supporting state and federal decarbonization goals.

Fortum Oyj (FORTUM FH) (5.75% of NLR Assets)

Fortum is a Nordic clean energy company and one of Europe’s largest producers of carbon-free electricity, with nuclear forming a core part of its generation fleet. The company operates Finland’s Loviisa plant and holds ownership stakes in several Swedish reactors at the Forsmark and Oskarshamn sites as well as Finland’s Olkiluoto plant. Fortum has secured a license extension allowing Loviisa to keep running through 2050, reinforcing nuclear’s role in its long-term, low-emission strategy. The company is also evaluating new nuclear opportunities, including small modular reactors, to help meet rising demand for reliable, clean power across the Nordics.

What Should Investors Consider When Evaluating Nuclear Energy Companies?

As the world shifts toward clean energy and decarbonization, nuclear energy companies are increasingly becoming an area of the market that investors are looking at. However, nuclear power comes with unique risks and factors that investors should weigh carefully.

Regulatory risks in the space are notable, as nuclear power is one of the most heavily regulated industries. Regulatory changes or heightened safety requirements can impact companies in numerous ways, making it essential to stay informed about the regulatory landscape. Geopolitical factors also play a role, especially in uranium mining, where operations in politically unstable regions can disrupt supply and influence pricing.

On the positive side, government support for nuclear power is growing as countries aim to meet decarbonization targets. Many governments offer incentives for advanced nuclear technologies, particularly small modular reactors, which could spur growth across the sector. Additionally, rising demand for clean, reliable energy, driven by sectors like data centers and AI, underscores nuclear’s role as a stable, round-the-clock energy source.

Finally, nuclear is a long-term investment, with new power facilities and technology often requiring years to construct and bring online. A diversified and global approach can help mitigate the risks tied to the nuclear industry, allowing investors to benefit from the sector’s robust potential while managing volatility for a more balanced return over the long term.

How to Invest in the Top Nuclear Companies Powering the Future

Investing in nuclear energy offers exciting potential as the world moves toward cleaner, more reliable power sources. From understanding the role of key industry players across uranium mining, advanced reactor technology, and power generation to carefully considering the unique risks and opportunities, investors can make informed decisions in this evolving sector.

The VanEck Uranium and Nuclear ETF offers investors comprehensive exposure to the nuclear energy ecosystem. In addition to uranium miners, the strategy’s targets nuclear energy producers, companies involved in construction, engineering and maintenance of nuclear projects, and those companies providing equipment, technology and/or services to the nuclear power industry.

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Why Chips Are a Critical Sector for Investors in 2026

• AI & Cloud Computing: Demand for advanced semiconductors continues growing as AI workloads expand across industries, with generative AI and large-scale inference driving a new wave of chip investment.
• Geopolitical & Supply Chain Shifts: U.S.-China trade tensions and government incentives (e.g., CHIPS Act) continue to influence semiconductor production strategies, with domestic fab buildouts gaining momentum. 
• Memory & Data Center Surge: AI model training and inference have significantly grown, fueling demand for high-bandwidth memory (HBM) and data center chips. This has lifted companies like Micron to the top five status in SMH.
• ASIC Growth: Application-Specific Integrated Circuits (ASICs) are becoming increasingly important in AI, crypto mining, and high-speed networking, driving innovation across the sector.

Top 5 Semiconductor Companies to Watch in SMH This Year^*

Holdings and weights as of 06/29/2026, excluding Nvidia (17.75%)

1. Taiwan Semiconductor Manufacturing Co. (TSMC) (9.04%)
• What They Do: The world's largest contract chip manufacturer, producing semiconductors for major companies like Apple and AMD.
• Outlook for 2026: With AI and high-performance computing demand driving greater chip complexity and volume, TSMC's position as the leading advanced-node contract manufacturer gives it exposure to long-term semiconductor growth trends. As a foundry, its results remain tied to capacity utilization, capital intensity, and the cyclical nature of global chip demand.
2. Micron Technology Inc (5.98%)
• What They Do: One of the world’s largest producers of NAND and DRAM flash memory chips, supplying data centers, mobile devices, PCs, and AI infrastructure globally.
• Outlook for 2026: With AI training and inference fueling demand for high-bandwidth memory (HBM) and high-density DRAM, Micron is positioned among the memory suppliers tied to data center and AI infrastructure growth. As a memory-centric business, its results remain subject to the historically cyclical nature of memory pricing and supply-and-demand dynamics.
3. Broadcom Inc. (5.49%)
• What They Do: Designs and develops semiconductor solutions, including chips for networking, broadband, and wireless communications.
• Outlook for 2026: Broadcom's portfolio spans custom AI accelerators, networking and connectivity silicon, and infrastructure software, giving it exposure to rising data center and AI networking demand. As a diversified semiconductor and software business, its results remain tied to hyperscaler capital-spending cycles, customer concentration, and competition across its networking and custom-silicon markets.
4. Advanced Micro Devices Inc (5.43%)
• What They Do: Compete with Intel in CPUs and GPUs, with a growing presence in AI and data center chips.
• Outlook for 2026: AMD's broadening lineup of data center CPUs, GPUs, and AI accelerators gives it exposure to rising demand for high-performance and AI computing. Its trajectory will continue to hinge on competition across the CPU and AI accelerator markets.
5. Intel Corp (5.09%)
• What They Do: Designs and manufactures microprocessors for data centers, PCs, and servers while executing a major strategic pivot to become a leading contract foundry through Intel Foundry Services.
• Outlook for 2026: Intel continues to pursue a multi-year strategic transition, including the build-out of Intel Foundry Services and advanced process nodes intended to restore its manufacturing competitiveness. Its progress across data center, client computing, and foundry will depend on execution against an ambitious roadmap in a highly competitive landscape.

Top Unique Holdings in SMHX (Not in SMH)

Holdings and weights as of 06/29/2026

1. Lattice Semiconductor Corp (3.96%)
• What They Do: Designs low-power, programmable Field-Programmable Gate Arrays (FPGAs) used in data centers, AI servers, industrial automation, and communications infrastructure.
• Outlook for 2026: Lattice's low-power, small-form-factor FPGAs serve edge, AI server, industrial, and communications applications that are linked to broader data center and automation trends. Demand for its programmable logic solutions remains tied to industrial and communications end-market cycles.
• ASIC Focus: Lattice's programmable FPGAs serve as a flexible complement and alternative to fixed-function ASICs, supporting AI-enabled edge and infrastructure designs where adaptability and low power are priorities.
2. SiTime Corp (3.62%)
• What They Do: Develops precision timing semiconductors using proprietary Micro-Electro-Mechanical Systems (MEMS) technology.
• Outlook for 2026: SiTime's MEMS-based precision timing solutions address growing demand for reliable timing across AI data centers, communications, automotive, and IoT systems. As electronic systems grow more complex and performance-sensitive, precision timing is a niche the company is positioned to serve.
• ASIC Focus: SiTime's precision timing components are increasingly designed into ASIC- and SoC-based architectures, where accurate, low-jitter timing supports high-speed AI, networking, and data center applications.
3. Rambus Inc (3.43%)
• What They Do: Specialize in memory and security chip solutions, playing a crucial role in high-performance computing.
• Outlook for 2026: As data center and AI workloads raise the bar for memory performance and data security, Rambus' memory interface and security intellectual property could remain relevant to high-performance computing trends. Its IP- and licensing-driven model offers exposure to these themes across a range of end-markets.
• ASIC Focus: Rambus' cryptographic security ASICs are increasingly vital in securing AI-driven and financial applications.

Accessing the Opportunities in The Semi Space

Investing in semiconductors requires an understanding of the market's cyclical nature and key industry drivers. Whether you're looking for broad exposure or a more targeted approach, ETFs can offer an efficient way to access the sector.

Key Takeaways for Accessing the Semiconductor Space:

• Diversification Matters: Investing in individual semiconductor stocks can be volatile. ETFs like VanEck Semiconductor ETF (SMH) and VanEck Fabless Semiconductor ETF (SMHX) provide diversified exposure to leading companies in the industry.
• AI, Data Centers, and Connectivity: As AI workloads, cloud computing, and 5G expansion accelerate, semiconductor demand is likely to remain resilient. Investors should consider exposure to companies driving these innovations.
• Understanding Fabless vs. Foundry: SMH provides exposure to both chip designers and manufacturers, while SMHX focuses exclusively on fabless semiconductor companies, which design chips but outsource manufacturing, offering a different risk/reward profile.
• Long-Term Growth Potential: With government support through initiatives like the CHIPS Act and increasing global semiconductor reliance, this sector remains a crucial long-term investment opportunity.

How to Invest in Semiconductors

For investors seeking broad exposure to the semiconductor industry, VanEck Semiconductor ETF (SMH) provides a diversified portfolio that includes both semiconductor designers and manufacturers, making it an attractive option for those looking to capture the industry's growth potential. Meanwhile, VanEck Fabless Semiconductor ETF (SMHX) focuses exclusively on fabless semiconductor companies, which benefit from high-margin chip design and innovation while avoiding the capital-intensive nature of manufacturing. By investing in these funds, investors can gain access to the evolving semiconductor landscape and capitalize on advancements in AI, IoT, and high-performance computing.

Both funds allow investors to participate in the semiconductor growth story while spreading risk across multiple companies. As AI, IoT, and high-performance computing drive semiconductor demand, these ETFs provide structured exposure to one of the market's most innovative industries.

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• Central Asia is becoming more investable to international investors, but each country tells a different story and requires a different approach.
• Uzbekistan is bringing major state-owned companies to public markets for the first time, representing one of the most significant privatization programs in emerging markets today.
• Kazakhstan offers compelling value in select companies, particularly in digital payments and uranium, as interest rates begin to turn.
• New trade routes, a wave of IPOs, and exposure to gold, uranium, and copper create a distinct opportunity across the region.

Why Central Asia, Why Now

In May 2026, VanEck’s Emerging Markets portfolio management team traveled to Uzbekistan, Kazakhstan, and Georgia to meet with governments, central banks, companies, and upcoming IPO candidates.

For years, Central Asia had the ingredients emerging markets (EM) investors traditionally look for: young populations, low financial and services penetration, strategic geography, and world-class natural resources. The bottleneck was not the macro story but rather whether that story could be supported by structural reform, sustainable institutions, and investable opportunities. This is beginning to change.

Global trade is being rerouted away from Russia, emphasizing the region’s role as a transit corridor. Commodity demand for uranium and gold is rising. Governments are selling stakes in major state-owned businesses for the first time. These are not incremental developments. They are structural shifts that are beginning to create a genuine investment opportunity for clients willing to look beyond the more familiar corners of emerging markets.

The key insight from the trip is that this is not one trade. Uzbekistan and Kazakhstan are two core Central Asian stories, each requiring a distinct investment approach. Georgia, while not part of Central Asia proper, enters the picture through its role in the emerging Middle Corridor trade route and as an additional equity opportunity we cover within the fund.

Uzbekistan — The Market Is Now Open

Uzbekistan is the most compelling structural growth story in the region. The economy is growing at nearly 8%, and average wages have doubled over the past three years, a shift that is driving first-time demand for banking, modern retail, and digital services. Inflation is falling, and interest rates are expected to decline over the next two years as the central bank gains confidence that its 5% inflation targetis within reach. Fiscal management is more disciplined than most investors expect: public debt is low, the budget is transparent, and the government has followed through on difficult reforms, including sharp increases in energy prices, despite the short-term pain they cause.

The political dynamics have been key to these positive economic changes. For the first 25 years of its independence, Uzbekistan was one of the most closed economies in the former Soviet Union. Since President Mirziyoyev came to power in 2016, the country has seen a series of structural reforms. The country’s progress going forward will continue to remain closely tied to the President’s agenda, with his mandate running through 2030. While the direction of policy has been consistent, any shift in political or social dynamics, or in the priorities of key decision-makers, would need to be monitored carefully.

The developing capital markets story is equally significant. The UZNIF IPO in May, nearly $700M and heavily oversubscribed, proved that global investors are ready to engage with Uzbekistan. A government decree has committed to bringing 12 more major state-owned companies to market by 2028, covering sectors from gold mining and uranium to telecoms, aviation, and banking.

The main risks to watch are valuation and execution. With limited listed history, early IPOs in Uzbekistan can attract higher valuation driven by scarcity demand. Entry discipline is essential. Beyond valuation, many of the companies coming to market still have deep state-sector roots and are adapting to public market standards. The opportunity is real but investors will need to see tangible progress on governance, disclosure, and minority shareholder alignment before participating.

Tariff-Related Inflation Spike Is Fading; FX Still Matters

Uzbekistan CPI, Year-on-Year

Source: Central Bank of Uzbekistan

Kazakhstan — A Value Market With Selective Structural Winners

Kazakhstan requires a different lens. This is a larger, more mature economy than Uzbekistan where the right framing is not high growth but value with specific catalysts, as select companies are attractively priced relative to what they deliver, and several near-term triggers have the potential to close that gap.

Interest rates are elevated, with the central bank's policy rate near 18%, but the disinflation trend is clear, and a cutting cycle already underway. Oil production has plateaued following the completion of a major field expansion, meaning future economic growth will increasingly depend on diversification beyond oil into a broader range of sectors. It is in uranium where the structural case is perhaps most compelling: Kazakhstan produces roughly 30% of the world's supply at a time when a global shortage is building and new mines take decades to develop.

Looking ahead, Kazakhstan's IPO pipeline adds further opportunity. KTZ, the national railway and a direct beneficiary of the Middle Corridor trade route, is targeting a listing in late 2026.

Disinflation Is Underway but Policy Rate Remains Tight​

Kazakhastan Inflation by Component, Year-on-Year

Source: National Statistical Agency of Kazakhstan

The Middle Corridor — A New Trade Route Takes Shape

One of the most underappreciated themes connecting all three countries is the emergence of the Middle Corridor, a new trade route running from China through Central Asia, across the Caspian Sea, and into Europe via the Caucasus and Turkey. It is gaining real traction as a direct alternative to routing goods through Russia.

For Kazakhstan, the financial impact is already visible. KTZ, the national railway, earns roughly 70 cents of operating profit for every dollar of transit revenue, far above the margins it generates on regulated domestic freight.China-to-Europe rail's share of total trade has risen from roughly 2% before 2022 to around 5% today, and there is meaningful runway from here.

While Georgia is not a Central Asian market, it sits at the western end of the corridor and its GDP growth of nearly 9%in early 2026 reflects that positioning. That said, its investment case is increasingly shaped by politics: the ruling party has consolidated power, EU membership has been paused until end-2028, and foreign direct investment has slowed. We stay invested through specific high-quality assets but do not underwrite Georgia as a clean convergence story.

An important nuance for investors: this route does not disappear if the war in Ukraine ends. As long as sanctions on Russia remain in place, businesses will continue to use the alternative corridor. The opportunity is durable, not transient. Centrum, an Uzbekistan-based logistics company, illustrates the commercial scale of what is possible, growing revenue from $100M to over $1B in just four years by positioning itself at the center of China-to-Europe cargo flows.

A Developing IPO PipelineUzbekistan is preparing to bring assets to public markets that have simply never been available to outside investors. The scale is significant, and the quality of some of these businesses are among the largest and most strategically important in their respective industries.

Navoi Gold is the standout. It is the world's fourth largest gold producer, generating $7B in annual operating profit at a 64% margin. When it lists, it could be one of the largest emerging markets IPOs in years. Navoi Uranium and AMMC add exposure to a uranium supply shortage and critical minerals demand respectively, at a time when both themes are attracting significant global investor attention.

Uzum, Uzbekistan's only unicorn, represents the consumer technology angle. A Tencent-backed super-app combining e-commerce, payments, and lending, it is targeting an IPO valuation of approximately $6B, the region's closest equivalent to what Kaspi became for Kazakhstan. Kazakhstan's own pipeline includes KTZ, Otbasy Bank, and potentially KMG, adding depth to an already active new-issue calendar across the region.

What This Means for Investors

Central Asia is in the early stages of opening its markets to outside investors. The combination of real economic growth, a pipeline of historically significant IPOs, commodity exposure in gold, uranium, and copper, and a rewiring of global trade routes makes this a distinctive opportunity, one that is difficult to replicate elsewhere in the emerging markets universe.

Our approach reflects the nuance the situation requires. In Uzbekistan, we are optimistic on the long-term direction but disciplined on entry valuation, as scarcity can drive prices ahead of fundamentals. In Kazakhstan, we see a more favorable backdrop taking shape as rates fall and the market begins to price in the underlying quality of select businesses. In Georgia, we stay invested through our highest-conviction position while keeping broader country exposure measured until the political picture improves.

Early engagement in markets like these, before they become widely followed and before the narrative is consensus, is precisely the kind of opportunity we have been built to identify and act on.

Our Positioning Across Central Asia

Across the region, our VanEck Emerging Markets Fund remains selective.

UZNIF* (0.17% of Fund Net Assets*), Uzbekistan's national privatization fund, holds stakes in 13 major state-owned enterprises (SOEs) spanning energy, aviation, banking, and telecoms.As the first sizable IPO out of Uzbekistan, it is the clearest signal that the country's capital markets are open for business and gives investors access to assets that were simply unavailable until very recently.

The structure draws on a well-established playbook: Romania's Fondul Proprietatea, created in 2005 to hold stakes in Romanian state-owned companies during that country's own privatization transition. Franklin Templeton, which managed Fondul Proprietatea through that process, is applying a similar investment philosophy to Uzbekistan through UZNIF. Past performance of a separate fund in a different country and period is not indicative of future results.

OTP* (1.1% of Fund Net Assets*), is the largest commercial bank in Hungary and a leading regional bank in Central and Eastern Europe. In 2023, the bank entered Uzbekistan by acquiring an 80% stake of Ipoteka, the largest mortgage lender in Uzbekistan.The bank has meaningful exposure to the country's developing housing market and growing middle class.

We believe Kaspi* (1.4% of Fund Net Assets*), Kazakhstan's dominant payments, ecommerce, and lending platform, is well positioned to benefit as interest rates begin to fall. High rates have created near-term headwinds, but the core franchise continues to grow strongly, with Kazakhstan orders up over 40% year-over-year in Q1 2026.We view the current pressure as cyclical rather than structural, and expect the business to benefit as the rate environment eases.

Lion Finance Group, previously known as Bank of Georgia* (1.4% of Fund Net Assets*), Georgia's leading bank with a dominant position in a highly profitable two-bank market, is our preferred way to access the country's strong economic growth. We believe the company will continue to grow its Armenian operations, benefiting from Armenia's lower banking penetration and rapid loan growth, which also reduces its exposure to Georgia's domestic political situation.

Positioning for Growth

Our meetings across Uzbekistan, Kazakhstan, and Georgia reinforced one clear conclusion: Central Asia is no longer a region to watch from a distance. The macro foundations are improving, a historic IPO pipeline is taking shape, and the Middle Corridor trade route is already generating measurable economic impact. The opportunity is real, but it is not uniform. Uzbekistan offers access to assets that have simply never been available to outside investors; Kazakhstan rewards patience and selectivity as rates begin to fall; Georgia remains a high-conviction position held with measured country exposure. What connects all three is timing. Markets like these re-rate quickly once the narrative becomes consensus.

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Key Takeaways

• NODE beat crypto but trailed equities: NODE returned -8.1% in June, with shares easing from $47.07 to $43.32. NODE topped Bitcoin (-20.3%), Ethereum (-21.9%), and the MVDAPP crypto-equity index (-14.9%), but lagged the S&P 500 (-1.1%) and Nasdaq 100 (-0.2%) in a month that punished crypto beta.
• Miners and crypto-linked names drove the drawdown: The spot bitcoin ETP (-17.8%), IREN (-27.7%), Figure (-23.4%), Applied Digital (-20.1%), and Circle (-32.8%) led the detractors, draining about 533 bps combined. Gains were narrow, with the top 5 positions adding roughly 114 bps.
• Risk stayed elevated as the book tightened: NODE ran at 50.1% annualized volatility with a 13.2% peak-to-trough drawdown, and only 8 of 21 trading days were positive. We trimmed the book from 64 to 58 holdings, and AUM fell from $81.4M to $74.0M.

Click here for NODE Standardized Performance

Past performance is no guarantee of future results. Investment return and principal value will fluctuate; shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher. Call 800.826.2333 or visit vaneck.com for month-end performance.

This commentary reflects the views of the portfolio management team as of June 30, 2026, and should not be construed as investment advice or a recommendation to buy or sell any security. Past performance does not guarantee future results; the Fund’s YTD return was 24.84% (NAV) through June 2026, and investors should consider this alongside any monthly figures presented herein.

Monthly Review

NODE declined 8.1% in June, with shares easing from $47.07 to $43.32 as the digital-asset complex sold off. Spot crypto led the move down, with Bitcoin off 20.3% and Ethereum 21.9%, while the mining and infrastructure names that powered May’s rally gave back ground. Even so, NODE outpaced crypto benchmarks by a wide margin, beating Bitcoin by roughly 12 percentage points, Ethereum by 14, and the MVDAPP digital-asset index by 7. It lagged broad equities, however, as the S&P 500 and Nasdaq 100 each fell less than 2% and finished about 7 percentage points ahead of NODE. June reversed May’s pattern: in May NODE trailed only the MVDAPP index; in June it cleared all three crypto benchmarks but fell behind the S&P 500 and Nasdaq 100, which held up far better in a month that punished crypto beta.

Source: Bloomberg. As of 6/30/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Biggest Winners and Losers

Miners and crypto-linked names drove the drawdown. Our spot bitcoin ETP cost 147 bps (-17.8%), followed by miner IREN (-27.7%, -139 bps), Figure (-23.4%, -92 bps), Applied Digital (-20.1%, -85 bps), and stablecoin issuer Circle (-32.8%, -71 bps). Those five detractors drained about 533 bps. Gains were narrow, led by Cipher Mining (+5.0%, +30 bps), GPGI (+27.8%, +24 bps), WYFI (+21.2%, +21 bps), Sei (+14.0%, +20 bps), and the newly added Inio (+19 bps). All together, the top five added roughly 114 bps combined.

Source: Bloomberg. As of 6/30/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Other assets held by the fund may have performed differently during the period.

Source: Bloomberg. As of 6/30/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Other assets held by the fund may have performed differently during the period.

Portfolio Changes

We consolidated the book from 64 names to 58, exiting 9 positions and adding 3. Exits included Broadridge, BWXT, Alliance Resource Partners, Cerebras, BitMine, Mirion, and the Korean industrials Doosan Enerbility and HD Hyundai Electric. New positions were SoFi, Inio, and DPC. AUM (assets under management) fell from $81.4M to $74.0M over the month.

June Risk and Return Summary

NODE ran at 50.1% annualized volatility in June, above Bitcoin at 40.8%, the Nasdaq 100 at 32.4%, and the S&P 500 at 17.3% but below crypto equity benchmarks such as MVDAPP. The fund saw a 13.2% peak-to-trough drawdown, and only 8 of 21 trading days were positive.

NODE moved almost in lockstep with the MVDAPP index at 0.98 correlation but, unusually, tracked equities more tightly (0.79 to the S&P 500, 0.81 to the Nasdaq 100) than Bitcoin (0.64) this month.

Source: Bloomberg. As of 6/30/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Source: Bloomberg. Daily returns, June 1–30, 2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Outlook

We remain constructive on AI infrastructure and tokenization while staying cautious on pure crypto beta. June was a reminder that mining and crypto-linked equities still carry real downside when spot sells off, even as they outperform the tokens themselves. We continue to lean into power and compute infrastructure and to manage concentration, with the top 5 positions at 31% of the book.

Frequently Asked Questions

Why did NODE fall in June 2026?

NODE returned -8.1% in June as the digital-asset complex sold off, with bitcoin down 20.3% and ethereum down 21.9%. The mining and crypto-linked equities that led May’s rally gave back ground.

Did NODE outperform bitcoin in June 2026?

Yes. NODE beat bitcoin by roughly 12 percentage points, ethereum by about 14, and the MVDAPP crypto-equity index by about 7. It trailed broad equities, however, as the S&P 500 and Nasdaq 100 each fell less than 2%.

Why are crypto mining stocks so volatile?

Mining and crypto-linked equities carry high beta to spot crypto prices. In June, NODE ran at 50.1% annualized volatility with a 13.2% peak-to-trough drawdown, and only 8 of 21 trading days were positive.

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• Wide underlying CEF discounts (~-7.9% or wider) have historically been associated with stronger 12-month returns for XMPT.
• Geopolitical shocks and liquidity events, not Fed rate cuts, have tended to create the widest discount opportunities.
• Today's narrower discount has historically corresponded with more modest forward returns; patience may be warranted.

What Are Muni CEF Discounts and Why Do They Matter?

Closed-end fund (CEF) discounts are one of the more honest signals in muni-land. When the funds an ETF holds trade below the value of their own portfolios, that gap tells you something about supply, demand, leverage, and investor sentiment. For the muni CEFs inside the VanEck CEF Muni Income ETF (XMPT), that discount has been more than a mood ring. Historically, how wide it was when you bought has lined up closely with what you earned over the next year. This piece lays out that framework first, then uses the past year of forces that push the discount around as evidence and ends with how to read it from here. The short version up front: a wide discount has been a strong entry point, and today's is not wide.

A quick clarification, because it's a common point of confusion. This is not XMPT's own premium or discount to its NAV. It's the weighted-average premium/discount of the underlying CEFs that XMPT owns, meaning how cheap or rich the fund's holdings are relative to their portfolios. It's a read on the muni-CEF market itself, viewed through XMPT's book.

When Has XMPT Historically Been a Good Buy?

The discount isn't just a description of sentiment. Historically it has been a usable entry signal. We sorted every month since inception (July 2011) by how wide the underlying-CEF discount was at the time, then measured XMPT's actual total return over the following 12 months.

Source: VanEck. Performance current to the most recent month end is available by calling 800.826.2333 or by click here: XMPT standardized performance

Performance quoted is past performance, which doesn't guarantee future results. Investment return and principal value fluctuate; shares when sold may be worth more or less than cost. Current performance may be lower or higher. Returns reflect fee/expense waivers (lower without them) and include dividends and capital gains.

Click here for XMPT Fee Information

The pattern is strong. Buying when the discount sat in its widest quartile (roughly −7.9% or wider) returned about +11% over the next year, positive 91% of the time. The second-widest quartile returned +9% (90% positive). The average band gave you little: +1.4%, a coin flip at 57%. And buying in the tightest quartile (tighter than −3.7%) was a net loser: −4% on average, positive only 28% of the time. The six-month horizon shows the same staircase. The mechanism is intuitive: a wide discount pairs a depressed price with an elevated distribution yield, and the discount tends to mean-revert, so you get paid to wait while the gap closes.

So, the framework is simple. The discount level is the single most useful number for timing an entry. Which raises the obvious question: what makes the discount move in the first place, and can you see the good entry points coming?

What Drives Muni CEF Discount Widening and Tightening?

The past year is a clean illustration, because it ran the discount across most of its range, from historically wide to nearly the tightest in years and back toward the middle.

Source: VanEck.

The discount started near −6.6% in late June 2025, in that rewarding wide zone, and spent the second half of the year grinding tighter, reaching −2.6% in late February 2026 before the picture cracked open.

The cleanest single catalyst on the way in was fiscal, not monetary. When the July tax bill (1) preserved the municipal interest exemption and raised the SALT cap, it removed a genuine overhang for the asset class. The discount tightened about 0.6 points over the following two weeks, the largest clean move in the dataset. Tax policy hits muni demand directly, with no "already priced in" offset.

The three Federal Reserve rate cuts (2, 3, 4) are more interesting for what they didn't do. Each was largely anticipated, and the discount tended to tighten into the meeting and then drift sideways or slightly wider afterward, a textbook "sell the news" pattern. The December cut barely registered at all.

Then the spring. A Middle East conflict and a Strait of Hormuz scare (5) broke late in February, and the oil spike that followed (6), with Brent vaulting past $100 on its way to roughly $126, coincided with the discount rolling over from its February peak and whipsawing through April. Single days swung from around −3.2% to −5.7% and back. That jaggedness is the signature of a liquidity-driven move: holders selling the liquid CEF shares into a risk-off tape faster than the underlying muni NAVs reprice. The two shaded bands mark government shutdowns, which added background uncertainty but produced little direct move on their own.

Step back and the year maps neatly onto the framework. The discount widens on stress and policy threats and tightens on demand catalysts and calm. The wide-discount entry points that history rewards tend to appear in exactly the messy moments: the shutdowns, the oil shocks, the risk-off scrambles. The tight readings, like today's, tend to arrive after a long stretch of good news.

Do Fed Rate Cuts Actually Move Muni CEF Discounts?

One force deserves a closer look, because it's the one most investors assume is in charge: the Fed. The intuitive story is the rate channel. Most muni CEFs use leverage, they pay a floating short-term rate to fund it, and when the Fed cuts, that financing gets cheaper, distribution coverage improves, and prices (and therefore discounts) should firm up. It's a real mechanism. The question is how much of the past year it actually explains. To test it, we plotted the discount against the federal funds upper bound, a clean proxy for the funds' floating leverage cost.

Source: VanEck.

Two things stand out. First, across the full year the discount and the policy rate are negatively correlated at about −0.66. As the Fed cut from 4.50% to 3.75%, the discount re-rated from roughly −5% toward −3%. So, the rate channel does leave a fingerprint, on the slow-moving level of the discount. Second, and more telling: from the December 10 cut onward, the policy rate didn't move at all. It sat at 3.75% for more than six months. Yet over that same flat-rate stretch, the discount still swung 3.06 points, from −2.6% to −5.7%. A driver that is perfectly constant cannot explain a three-point move. The biggest volatility of the year happened with rates pinned in place, which points back at the geopolitical and liquidity forces rather than the Fed.

The lesson for the framework: rates set the backdrop, but they rarely hand you the entry point. The wide-discount opportunities come from the shocks the Fed isn't causing.

How to Use the XMPT Discount Framework Going Forward

The practical takeaway is to keep XMPT on a watch list and let the discount come to you. The income accrues either way. But the asymmetry is clear in the record: when the headlines are bad and the gap is wide, that has been the time to get interested in allocating more.

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10 Robotics Companies Driving Innovation in 2026

Robotics technology is no longer a futuristic concept; it is here and rapidly evolving. The following ten companies are at the forefront of this revolution, leading in manufacturing, automation, and machine learning applications. Where noted, IBOT weighting figures indicate each company’s percentage weight in the VanEck Robotics ETF (IBOT) as of June 24, 2026.

1. Fanuc Corporation (3.08%)
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: Fanuc has captured a significant share of the global industrial robotics market, with strong contributions in manufacturing and electronics.
• Why It Matters: With a strong foothold in the manufacturing sector, Fanuc’s robots are critical in enhancing precision and efficiency, particularly in electronics production.
2. ABB Ltd. (5.14%)
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: ABB has installed over 500,000 industrial robots worldwide, solidifying its position as a leader in automation solutions.¹
• Why It Matters: Though ABB divested its robotics division to SoftBank², ABB Ltd. continues to play a major role in the broader automation landscape — streamlining industries through advanced manufacturing and industrial automation systems across sectors worldwide.
3. Yaskawa Electric Corporation (1.89%)
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: Yaskawa has installed over 600,000 robots globally, demonstrating its dominance in industrial automation.³
• Why It Matters: The company’s automation systems contribute significantly to efficiency in production lines worldwide.
4. KUKA AG
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: KUKA is a pioneer in developing robotics for manufacturing, particularly in automotive assembly and material handling. More than 500,000 KUKA robots are in use worldwide.⁴
• Why It Matters: Automotive giants rely on KUKA’s innovations to automate assembly lines, reduce costs, and improve product consistency.
5. Emerson Electric Co (5.02%)
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: Emerson is a global industrial technology leader delivering automation software and hardware for various industries.
• Why It Matters: Emerson’s automation platforms are pivotal to smart factory deployments globally, and its reach across infrastructure sectors makes it among the most deployed industrial automation companies in the world.
6. Rockwell Automation Inc (3.76%)
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: Rockwell Automation is widely considered the world’s largest pure-play industrial automation and information company, offering PLCs (Programmable Logic Controller), motion control, and smart manufacturing solutions to manufacturers.
• Why It Matters: Rockwell’s control systems and automation platforms are essential to the surge of domestic factories being built across various sectors.
7. Boston Dynamics
• Focus: Robots and Manufacturing/Industrial Automation Systems
• Known For: Boston Dynamics’ Spot robots are deployed across factory floors, construction sites, and research labs globally, with over 1,500 in customer hands.⁵
• Why It Matters: The company’s advanced robotics technology is expanding the capabilities of robots in industries such as security, logistics, and disaster response.
8. Intuitive Surgical (0.85%)
• Focus: Robotic Surgical Systems
• Known For: Intuitive Surgical’s da Vinci robotic systems have been used by surgeons to operate on over 20 million patients globally.⁶
• Why It Matters: Intuitive Surgical is at the forefront of medical robotics, revolutionizing healthcare by enhancing precision and reducing recovery times for patients.
9. Cognex (1.01%)
• Focus: Machine Vision
• Known For: Cognex is the world’s leading provider of machine vision systems used in manufacturing automation.
• Why It Matters: Cognex’s vision systems, the eyes of modern factory robots, are essential infrastructure for automated production lines, enabling defect detection, part identification, and quality inspection at scale.
10. Keyence Corp (5.11%)
• Focus: Machine Vision
• Known For: Keyence is a global leader in machine vision technology, supporting automation with innovative sensors and imaging solutions.
• Why It Matters: Keyence’s innovations are enabling next-generation robotic applications, enhancing quality control and precision manufacturing.

Honorable Mention:

11. Tesla and the Rise of Humanoid Robotics
• Focus: AI-Driven Automation/Humanoid Robots
• Known For: Tesla leverages existing AI and computer vision expertise from its vehicle program for its Optimus humanoid robot, designed to perform repetitive or dangerous tasks.
• Why It Matters: Like how Tesla disrupted the auto industry, their entry into humanoid robotics signals the same. If Optimus achieves commercial scale, it could redefine labor automation.

What Investors Should Know About the Robotics Industry in 2026

Robotics is a transformative force across industries, driving innovation and efficiency in ways previously unimaginable. As an investor, understanding the key sectors impacted and the broader economic trends shaping robotics adoption can provide a comprehensive view of the opportunities within this rapidly evolving market.

Which Industries Are Being Transformed by Robotics Companies?

Manufacturing

• Robotics is revolutionizing the manufacturing sector, particularly in assembly lines, logistics, and precision welding. Automated solutions are now the backbone of smart factories, helping to reduce labor costs, minimize errors, and improve productivity.

Healthcare

• Robotic-assisted surgeries and automation in diagnostics are reshaping patient care. Technologies like robotic surgical systems and AI-driven diagnostic tools are increasing precision, improving outcomes, and enhancing accessibility in healthcare. For instance, robotic arms are being widely adopted for minimally invasive surgeries, reducing recovery times for patients.

Logistics and E-Commerce

• Warehouse automation and delivery robots are streamlining operations, enhancing order fulfillment, and reducing costs. Companies like Amazon and Walmart are pioneering the use of robotics in automated warehouses, ensuring faster delivery and more efficient inventory management.

Agriculture

• Precision farming technologies are optimizing crop yields and addressing labor shortages in the agricultural sector. Robotic systems for planting, harvesting, and monitoring are helping to improve productivity and sustainability in food production.

What Economic Trends Are Driving Robotics Adoption?

Labor Shortages

• Demographic shifts, such as aging populations and changing workforce preferences, are creating labor gaps in many countries. Nations like Japan and Germany are investing heavily in robotic automation to address these shortages, with robots increasingly performing tasks in elderly care, factory assembly, and beyond.

AI Integration

• Artificial intelligence is revolutionizing robotics by making machines smarter, more adaptive, and capable of handling complex tasks. AI-driven robots are being deployed across industries to improve predictive maintenance, optimize workflows, and expand the scope of automation. For example, AI-enhanced logistics robots can use real-time data to adjust operations dynamically, reduce downtime, and boost efficiency.

Government Support

• Governments around the world are incentivizing the adoption of robotics through subsidies, policies, and funding initiatives. Programs like Germany’s Industry 4.0 and China’s Made in China 2025 are promoting the digitalization of manufacturing and advancing robotics innovation. These initiatives aim to boost economic competitiveness, reduce reliance on imports, and foster leadership in high-tech industries.

What Are the Key Risks of Investing in Robotics Companies?

• High R&D Costs: Robotics development requires significant investment in research and development, impacting profitability.
• Regulatory Challenges: Robotics used in healthcare and autonomous systems face stringent regulatory approvals.
• Technological Obsolescence and Competition: Rapid innovation cycles mean companies must continuously evolve to remain competitive.

By staying informed about these industry applications and economic drivers, businesses and investors can strategically position themselves to capitalize on the growth and innovation in the robotics sector. Understanding these dynamics is essential for navigating the opportunities and challenges in this transformative market.

How Can Investors Gain Exposure to Top Robotics Companies?

The VanEck Robotics ETF (IBOT) invests in companies that are involved in robotics, targeting companies that derive at least 50% of their revenues from one or more of seven subthemes. These themes include robots and manufacturing/industrial automation systems, robotic surgical systems, 3D printing, robotics or manufacturing computer-aided design or other software, semiconductor manufacturing systems, machine vision, and embedded machine learning chips. Coverage includes global companies in developed markets, providing exposure to the world’s largest markets, including China, the world’s leader in industrial robotics demand.

Conclusion

The robotics industry is undergoing a transformative era, with advancements in AI, automation, and machine learning driving its rapid evolution. From manufacturing and healthcare to logistics, e-commerce, and agriculture, robotics is revolutionizing industries while addressing challenges like labor shortages and operational inefficiencies. Leading companies such as Fanuc, ABB, and Intuitive Surgical are at the forefront, spearheading innovation across seven key subthemes like industrial automation, machine vision, and robotic surgical systems. Understanding these subthemes and the economic trends driving robotics adoption is essential for investors to capitalize on this transformative market while navigating its associated risks.

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• The top 10 S&P 500 stocks now account for approximately 40% of the index, nearly double their share from a decade ago.
• International developed markets have recently traded at ~16x forward P/E vs. ~22x for the S&P 500, which may represent a valuation opportunity (MSCI EAFE, May 2026).
• VEFA seeks exposure to developed market companies outside the US and Canada, selected based on positive analyst sentiment signals.

Understanding Concentration Risk in the S&P 500

For investors using the S&P 500 as their primary equity allocation, a small number of mega-cap stocks now account for nearly 40% of the index, driving most of their returns and, in a downturn, most of their losses (VanEck, May 2026). Investors who have focused strictly on the US over the past decade have been rewarded with strong returns, but past performance is not a guarantee of future results, and a portfolio concentrated in a handful of names carries risks that broad diversification is designed to reduce.

What Is Concentration Risk?

Concentration risk occurs when portfolio returns are heavily dependent on a small number of stocks, sectors, or geographies. The S&P 500 itself is structurally concentrated at the index level, meaning even a passive allocation is top-heavy by design. While that concentration has rewarded investors over the past decade, holding only S&P 500 exposure means there is no buffer if that trend reverses. Concentration is not inherently bad, but it should be intentional.

How Concentrated Has the S&P 500 Become?

What was once a broadly diversified index has become increasingly top-heavy. A decade ago, the top 10 S&P 500 stocks accounted for roughly 18% of the index (VanEck, May 2016). Today that figure has nearly doubled, with the top 10 now representing close to 40% of the total index weight.

Top 10 Holdings Weight: S&P 500 vs. MSCI EAFE (2016 vs. 2026)

As of May 31, 2026 and May 31, 2016. Source: VanEck.

A passive S&P 500 allocation is now effectively an active sector bet, whether the investor intended it or not. By contrast, the MSCI EAFE index is significantly less concentrated, spreading risk more evenly across companies, sectors, and geographies.

Why Are Advisors Looking at International Diversification?

Several factors have converged to bring international diversification back into focus:

• Valuation gap: International markets trade at a meaningful discount to the S&P 500 on earnings multiples. The S&P 500 currently trades at a forward P/E of around 22x compared to roughly 16x for MSCI EAFE, a gap that has historically been a meaningful signal for relative returns.
• Unintentional sector bets: AI-driven concentration has quietly pushed many client portfolios into large overweights to tech and semiconductors that advisors often catch after the fact.
• Improving international fundamentals: European and Asian companies have shown encouraging signs of earnings improvement, supported by fiscal stimulus and corporate reform efforts, making the case for international exposure more than a valuation story.

What Does Developed International Exposure Actually Look Like?

Moving beyond the S&P 500 does not mean moving into speculative or illiquid markets. Developed international equities (as represented by MSCI EAFE) are large, profitable global companies, just listed outside the US and Canada. The MSCI EAFE universe covers large and mid-cap equities across Europe, Japan, and Australasia, including household names like Nestle, Toyota, ASML, and Novo Nordisk. The practical result is reducing the share of a portfolio that rises and falls with a small number of US mega-cap names, without sacrificing quality or liquidity.

How Can a Sentiment-Enhanced Approach Help Reduce Concentration Risk?

A broad EAFE allocation reduces concentration risk and provides geographic diversification, but holds the market with no tilt toward companies with improving fundamentals. An analyst sentiment-enhanced approach layers a sentiment signal on top of that diversification benefit, tilting toward companies where analyst revisions are trending positive. The result is geographic diversification plus a sentiment signal, rather than simply swapping US concentration for broad international exposure. This approach does carry some active risk relative to a plain EAFE index, but the strategy is designed to keep that risk within a defined range while still delivering the diversification benefit.

How Does VEFA Address S&P 500 Concentration Risk?

VEFA is designed to address the two challenges this blog outlines: the concentration risk embedded in an S&P 500-only allocation, and the missed opportunity of holding broad international exposure without any tilt toward improving fundamentals. The fund provides exposure to approximately 100 large and mid-cap developed market companies outside the US and Canada, selected based on positive analyst sentiment signals, and tracks the MSCI EAFE Analyst Sentiment Select Index (VanEck, May 2026). It rebalances quarterly and seeks to maintain ex-ante tracking error below 4% relative to MSCI EAFE (VanEck, May 2026).

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• A years-long drought decimated breeding stock, leaving the domestic cattle supply at generational lows with no quick path to recovery.
• Unlike ranchers who benefit from premium beef prices, packers absorb the cost of scarce livestock without controlling what consumers pay at the counter.
• Counterintuitively, today's dire conditions may signal opportunity — as capacity exits, margins normalize, and financially resilient processors trade near what may prove to be a cyclical bottom.

In a market where nearly every natural-resource sector is enjoying fat margins, U.S. beef packers stand out for the hopelessness of their operating environment. To us on the Global Resources Team at VanEck, that is precisely what makes them worth a hard look.

For U.S. beef packers, conditions look bleak. At the beginning of the year, the USDA counted about 86.2M head of cattle, which is the seventh consecutive annual decline and the smallest figure since 1951. Many are dairy cows and are not even reared for beef. The number of beef-cows is 27.6M, the lowest since 1961.

Then there is New World screwworm, a flesh-eating parasite that was eradicated from the U.S. in 1966 which resurfaced again this month, with cases clustering around South Texas and New Mexico. It is the reason the southern border has been shut to Mexican cattle imports, which normally supply 1.2M to 1.5M head a year. In 2025, only 0.2M crossed over. We think screwworm is ultimately controllable; the sterile-fly eradication playbook worked once and can work again, though ramping fly production could take several months.

U.S. Cattle Inventory on the Decline

Source: USDA. Data as of June 2026. For illustrative purposes only.

No Grass for Grass-Fed Cattle

How we got here is mostly a story about drought. Successive dry years across the Southern Plains scorched pasture and forced ranchers to cull the breeding cows they would otherwise have kept, accelerating a liquidation that pushed the herd well past a normal cyclical low.

Unlike, say, a chicken that takes about seven weeks to reach slaughter weight, a calf takes roughly 18 to 24 months. And when cattle are scarce and cattle prices are high, ranchers do the rational thing and hold animals back a little longer to add weight before selling, which perversely tightens near-term supply even further. We saw this in the data with cattle live weights setting records throughout 2025 and into 2026.

Spotlight on the Southern Plains:

Source: DroughtMonitor. As of June 2026. For illustrative purposes only.

Record-setting U.S. Cattle Weight

Source: USDA. As of March 31, 2026. For illustrative purposes only.

Economics 101

The crux is in the margin. Beef packer economics reduce to the “cutout-to-live” spread, which is the difference between the price of a beef “cutout” and the price paid for live cattle. Record beef prices have not helped as much as one may think. In the U.S., beef packers are not vertically integrated and this point gets muddled in the financial press. High cattle prices are the packer's poison, not its windfall.

It is the ranchers and the cattle feeders who are the ones seeing excellent returns and cashing in. The beef packer is the squeezed middle, buying dear and selling into a retail market it does not control. When cattle are scarce, packers compete fiercely for a shrinking pool of fed animals and that spread collapses. Companies like Tyson Foods and JBS have braced investors for another difficult year for their beef segments. The cash generated from beef sales is not enough to justify the all-in cost to simply run a beef plant (labor, facilities, fabrication, etc.). The math does not work.

In Focus: Tyson Foods Adjusted Operating Income

Source: Tyson Foods. Data as of March 31, 2026. For illustrative purposes only.

Too Many Plants, Too Few Cattle

For the first time in a decade, January's USDA cattle inventory numbers showed a small uptick in heifers (females that have not yet given birth), which is a tentative sign that ranchers are contemplating herd expansion. But every heifer held back to breed is a heifer pulled out of the slaughter pipeline, so this first phase of a rebuild makes beef scarcer, not more plentiful. We don't expect genuine herd growth to show up before 2028.

That said, U.S. beef packers are not waiting around and have begun rationalizing capacity. Tyson Foods plans to close its Lexington, NE plant, which is a relatively large one that slaughters about 4,500 head a day, and reduce its Amarillo, TX facility to a single shift, pulling industry capacity down. JBS is following Tyson out the door. Earlier this week, it announced that it would close its Souderton, PA, plant (roughly 2,000 head per day), along with a beef value-added operation in Memphis, TN. Too many plants competing for too few cattle hurts margins, and taking capacity offline is a fix that also guards against a drawn-out slump during the next leg of the cycle.

These are sound, diversified companies, not pure-play beef producers. Chicken, pork, and value-added products (e.g., Dino Nuggets, a favorite in our home) are each generating cash while beef suffers. As capacity tightens and the herd eventually rebuilds, the cutout-to-live spread recovers, and with four meat producers controlling around 85% of processing, pricing discipline returns quickly once the overhang clears. Add in the eventual reopening of Mexican cattle flows, which we expect to happen this year, combined with a contained screwworm, and throughput recovers on top of margin.

This is not a bet on high beef prices. It is a bet on margin normalization and capacity rationalization at financially resilient operators trading near cyclical lows, while the market appears to price trough losses as permanent. Beneath it all is a simple, enduring fact: people have to eat.

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Key takeaways

• BNB Chain operates at consumer scale: roughly 34 million monthly active users (+72% y/y) moved about $127 billion in peer-to-peer stablecoin volume in May 2026, at a median fee of less than half a cent.
• Real-world assets are finding a home onchain: tokenized RWA value on BNB Chain stands at about $3.89 billion, the second-highest of any blockchain, spanning Treasuries, money market funds, and equities.
• The token’s supply shrinks as usage grows: quarterly and real-time burns have removed 12% of BNB supply since June 2023, wiring the token’s value to activity on the network.

What is BNB Chain and the BNB Token?

BNB Chain is a financial marketplace that happens to run on a blockchain. People go there to move money, trade, lend, borrow, speculate, and increasingly to hold tokenized versions of real-world assets. It settles transactions in under a second, costs a fraction of a cent to use, and never closes. That combination has pulled in a large and active user base, and it has made the network one of the busier venues in onchain finance.

Two things are worth separating up front, because they are easy to conflate: the network and the token.

The network is BNB Chain. It is a public blockchain, originally spearheaded by Binance in 2020, that anyone can build on and anyone can use without permission. Think of it as shared financial infrastructure that runs the applications other people write, from exchanges to lending markets to payment apps. There is no central operator deciding who gets access. Today, BNB Chain is a decentralized and independent ecosystem, operating separately from the centralized Binance exchange. As a result, anyone who can code (or use Claude) can deploy an application. These applications can earn their builders significant revenues and should be thought of as emerging fintechs. Because BNB Chain is software hosted on many servers, it is often referred to as a “network.”

The token is BNB. It is the unit that pays for activity on the network. Every transaction, whether that is sending a stablecoin, trading on an app, or minting a tokenized asset, requires a small amount of BNB to process. The more the network gets used, the more BNB is needed to run it. When people pay for their transactions on BNB Chain, part of the BNB tokens sent is burned and the other portion is awarded to validators. BNB currently sits around an $80 billion market cap, which makes it a top-5 crypto asset, and it ranks top-3 among Layer 1 (L1) networks by active users.

In this piece, we walk through why we believe the BNB token and the BNB Chain are interesting.

What Makes BNB Chain Stand Out

How many people use BNB Chain?

In May 2026, BNB Chain averaged roughly 34 million monthly active users, up +72% y/y. This user base is widely dispersed globally, with significant representation in emerging markets such as Latin America, the Middle East and North Africa, and Asia-Pacific. Typically, BNB Chain is among the top 3 blockchains in monthly active users. Additionally, this user activity is sticky, with roughly 70% of daily activity performed by returning users. While the mean transaction fee was around $0.027 in Q1 2026, the median transaction fee was around $0.0038.

BNB Monthly Active Users +72% Y/Y in May 2026

Source: Artemis XYZ as of 6/12/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

We believe BNB’s stablecoin activity demonstrates that most of that activity is organic and that people are using BNB in everyday financial transactions. Peer-to-peer stablecoin send volume reached about $127 billion in May 2026, moved by more than 15 million stablecoin users across roughly 177 million stablecoin transactions over the month. BNB has 69.7M stablecoin holders, and the chain accounts for 32% of all peer-to-peer stablecoin transactions across all blockchains (Artemis XYZ as of 6/12/2026).

"BNB Chain accounts for 32% of all stablecoin transactions across all blockchains."

Stablecoin supply on BNB Chain is around $17.2 billion, up 64% y/y, with Tether (USDT), USD Coin (USDC), and First Digital USD (FDUSD) all expanding their footprints. For context, that supply was under $300 million at the end of 2020, so it has grown close to 50x in roughly 5 years. BNB Chain has been the fastest-growing stablecoin network among the majors over that stretch.

BNB Chain Stablecoin Daily Active Users +33% YTD

Source: Artemis XYZ as of 6/12/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Real-World Assets (RWAs) on BNB Chain

Beyond stablecoins, the chain has become a repository for tokenized real-world assets (RWAs). RWA value on BNB Chain stands at about $3.89 billion, the second-highest of any blockchain, and it has grown roughly 182x y/y (RWA.xyz as of 6/12/26). That includes tokenized money market funds and Treasuries, the most conservative end of the tokenization story. It also includes tokenized equities, which saw around $900 million in trading volume in May 2026 against roughly $857 million in assets, with tokenized Circle (CRCL, $103M), Micron (MU, $53M), and Nvidia (NVDA, $32M) among the names trading on BNB.

BNB’s Real World Asset AUM +81% YTD

Source: RWA XYZ as of 6/10/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

What Apps Run on BNB Chain?

More than 2,000 active applications run on BNB Chain, and they offer services similar to what is found on Solana, Ethereum, and other L1 blockchains. These application types include decentralized trading of spot crypto and perps (perpetual futures) as well as borrow/lend activity. Decentralized exchange (DEX) volume ran to roughly $1.4 trillion in 2025 (highest among all blockchains) and about $337 billion so far in 2026 (second highest). Prediction markets have cleared more than $17.9 billion in volume in 2026. Meanwhile, lending and borrowing markets hold around $1.7 billion in value.

A few applications are worth naming, because they show the range of BNB. PancakeSwap is the largest decentralized exchange on BNB Chain and one of the largest anywhere, and it does the bulk of that DEX volume. Venus Protocol is the main money market, where users supply assets to earn yield and borrow against collateral, which is most of that $1.7 billion in lending value. Lista DAO handles liquid staking, letting users stake BNB while keeping a tradable claim they can use elsewhere in decentralized finance (DeFi). Layered on top is a steady stream of consumer activity, from meme and launchpad trading to the prediction markets noted above, which is where a lot of the transaction count comes from.

BNB Led DEX Spot Volume in 2025

Source: Artemis XYZ as of 6/10/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

BNB Chain Uptime and Reliability

Reliability is easy to overlook until it fails, and not all blockchains have remained operational at all times. BNB Chain ran with zero downtime across 2025 and thus far in 2026. This resilience has remained intact through 4 major upgrades on a live network. This means that while BNB’s software was updated, users could still perform financial transactions. The network’s throughput peaked at 8,384 transactions per second on December 10, 2025. Block times run under a second, around 0.45 seconds, and the network has handled as many as 33 million transactions in a single day at its intraday peak.

How Much Revenue Does BNB Chain Generate?

BNB Ranks 4^th in Blockchain Fees in 2026

Source: Artemis XYZ as of 6/12/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Activity on BNB translates into revenue for BNB’s network and demand for the BNB token. BNB Chain generated $259 million in network fees in 2025, up 33% y/y, which made it the 4th-highest fee-generating blockchain globally that year. It has earned about $63 million in network fees in 2026 to date. Though fees collected by the network YTD 2026 are much lower than they were over the same period in 2025, BNB is still holding its position as the 4th-highest-grossing blockchain in 2026. The applications running on top of BNB have earned substantial topline revenue: roughly $757 million in fees in 2025 and about $192 million so far in 2026.

What Drives BNB Token Value?

There Have Been 35 BNB Token Burns

Source: Artemis XYZ as of 6/12/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

BNB is deflationary by design, and this is driven by 2 main mechanisms. The first is a quarterly auto-burn, where the protocol permanently removes tokens from supply based on network functionality and usage. The most recent burn, completed in April 2026, removed about 1.57 million BNB, worth roughly $1.02 billion, and the January 2026 burn removed about 1.37 million BNB, worth roughly $1.28 billion (BNB Foundation as of 1/15/26). The quarterly burn has removed 12% of supply since June 2023, or around 18.8 million BNB tokens. The second mechanism is a real-time burn generated by transactions on BNB, introduced under a democratically passed governance proposal called BEP-95. Total supply is about 134.7 million BNB today and is being steered lower over time.

How BNB Token Value Tracks Network Usage

BNB is a valuable asset that is central to the functioning of the BNB network, and without its economic value, the network would not be operational. To run the network, validators who process BNB transactions must stake BNB, and only the top 21 validators by stake amount win the right to operate the BNB network. These validators are tied to the economics of BNB by their captive stake and are paid for their validator duties only in BNB tokens. As a result, they have a strong incentive to perform their duties effectively to ensure BNB runs efficiently. Because they are paid for their services in BNB tokens, they also have a long-term interest in ensuring the BNB token maintains its value.

The same logic runs through the whole system. Every transaction burns and spends BNB, so a busier network mechanically pulls more BNB into use and out of supply. Usage and token demand are linked rather than coincidental. BNB Chain is a cheap, fast, 24/7 financial marketplace to launch a financial application and reach a large existing user base. As more of those applications launch and attract users, activity on the chain rises. Rising activity means more fees and more burning, both of which accrue to the BNB token. The token effectively tracks the growth of the marketplace it powers.

"The token effectively tracks the growth of the marketplace it powers."

What’s Next for BNB Chain: AI and Builder Funding

There are 2 threads worth watching to track BNB’s growth story. The first is artificial intelligence (AI). More than 60 AI projects were deployed on BNB Chain in 2025, and the chain is building infrastructure for autonomous agents that transact onchain directly. BNB is a natural fit for the type of activity we anticipate AI agents will perform. We believe AI agentic commerce will be characterized by large numbers of low-value transactions that require firm guardrails and consistent uptime. BNB’s strong operational track record, its high throughput capacity, and its low fees make it an ideal home for AI agentic commerce.

The second dynamic that will power BNB’s future is the deep pool of funding for builders. In October 2025, BNB Chain launched a $1 billion Builder Fund in partnership with YZi Labs, which provides per-project funding of up to $500,000 through its EASY Residency program, alongside performance-based gas rewards that subsidize apps once they attract real users. There are many blockchains with similar technical capabilities to BNB, but the true differentiator is persistent, long-term funding by committed backers such as YZi Labs. This funding means more developers building more interesting applications. Ultimately, if these apps are successful, their users will perform more transactions, and every transaction requires BNB.

The Bottom Line on BNB Chain and BNB

BNB Chain is a working financial marketplace with real activity behind it. Tens of millions of people use it every month: they move tens of billions of dollars in stablecoins, they trade on the highest-volume DEX of any chain, and they are starting to hold tokenized Treasuries and equities on BNB. That activity is concentrated in fast-growing regions, with significant user bases across Asia, Latin America, and the Middle East. The network earns real fees from all of it, and it has stayed online through every upgrade and every traffic spike.

The token sits at the center of that system, and its value derives from activity on BNB Chain. This is because BNB must be used to pay for network activity, BNB must be stockpiled by validators who secure the network, and BNB shrinks in supply as usage grows. As BNB activity accelerates, it should translate into value for BNB tokenholders, but nothing is certain. In short, BNB has persisted as a winner amid the L1 race because its chain offers its users substantial value, and we believe the BNB token is effective at capturing that value. Going forward, we foresee a strong future for the BNB Chain as well as its token.

Frequently Asked Questions

What is BNB Chain?

BNB Chain is a public blockchain originally launched by Binance in 2020 that anyone can build on and use without permission. Today, it is a decentralised, independent blockchain ecosystem that settles transactions in under a second at a median fee of less than half a cent, and it averaged roughly 34 million monthly active users in May 2026, ranking among the top 3 blockchains by monthly active users.

What makes the BNB token deflationary?

BNB supply is reduced through 2 burn mechanisms: a quarterly auto-burn that permanently removes tokens based on network usage and a real-time burn on every transaction introduced under governance proposal BEP-95. Together, the quarterly burns have removed 12% of supply since June 2023, or around 18.8 million BNB.

How are stablecoins and real-world assets used on BNB Chain?

BNB Chain processed about $127 billion in peer-to-peer stablecoin volume in May 2026 and accounts for roughly 32% of all stablecoin transactions across blockchains. Tokenized real-world assets on the chain total about $3.89 billion, the second-highest of any blockchain, including tokenized Treasuries, money market funds, and equities.

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• Energy investment, not just oil prices, may become a key driver of the next phase of the energy cycle.
• The long-term demand outlook remains highly debated, shaped by emerging markets, petrochemicals, transportation trends and rising power needs.
• Oilfield services companies and refiners may benefit if spending across the energy value chain accelerates.

Why Energy Infrastructure Matters More Than Oil Prices Right Now

When energy markets make headlines, the conversation usually centers on one thing: where oil prices are headed next. Yet focusing exclusively on commodity prices may cause investors to overlook a broader question: does the global energy system have sufficient capacity, equipment and infrastructure to meet future energy needs under a wide range of scenarios? Whether demand grows faster than expected, geopolitical disruptions reduce supply, or electricity consumption accelerates alongside AI and data-center development, each scenario ultimately points to the same challenge: maintaining adequate energy infrastructure.

Over the past decade, oil and gas producers have largely prioritized capital discipline, debt reduction and shareholder returns over aggressive production growth. That shift helped strengthen balance sheets throughout the industry, but it also contributed to a prolonged period of restrained spending relative to previous cycles. While this approach was welcomed by investors, it left a growing question in its wake: will current investment levels be sufficient to meet future energy needs?

That question has become increasingly relevant as the long-term energy demand outlook remains uncertain, geopolitical tensions continue to affect supply chains and infrastructure requirements grow more complex. At the same time, rising electricity consumption tied to artificial intelligence (AI), data centers and industrial development is creating new sources of demand that extend beyond traditional transportation markets.

Taken together, these forces suggest that the next chapter in the energy story may be defined not only by the price of a barrel of oil, but also by the amount of capital required to produce, transport and refine the energy the world continues to consume.

More fundamentally, the challenge facing policymakers, producers and investors is not simply forecasting future demand. It is ensuring that sufficient production, transportation and processing capacity exists to meet energy needs across a range of potential outcomes. That reality may help explain why investment trends are becoming increasingly important to the energy outlook.

The Demand Story Is More Complex Than the "Peak Oil" Debate

Few topics generate more debate in energy markets than the question of peak oil demand. While the concept has become a focal point for investors and policymakers alike, the reality is considerably more nuanced than a simple growth-versus-decline narrative.

Much of the uncertainty stems from the fact that global demand trends are increasingly diverging by region. In many developed economies, improvements in fuel efficiency, changing demographics and the growing adoption of electric vehicles have contributed to slower consumption growth. In contrast, demand in many emerging economies continues to expand as industrialization, urbanization and rising incomes support greater energy use.

China remains central to this discussion. The country has emerged as the global leader in electric vehicle adoption, raising legitimate questions about future gasoline demand. Yet China also remains one of the world's largest consumers of crude oil, while neighboring economies such as India continue to experience significant growth in energy consumption. As a result, developments across Asia are likely to remain among the most important determinants of future global demand.

It's also important to remember that transportation fuels represent only one part of the oil demand equation. Crude oil serves as a key feedstock for petrochemicals used in everything from plastics and packaging to fertilizers and consumer products. Even in scenarios where gasoline demand growth moderates, these industrial applications may continue to support a meaningful role for oil in the global economy.

For investors, the more important takeaway may be that uncertainty cuts both ways. Regardless of where demand ultimately settles, the energy system must be capable of meeting consumption needs across a range of potential outcomes.

What OPEC+ Policy Means for Energy Market Stability

While demand often dominates discussions about the long-term outlook, supply-side decisions can have an equally important influence on energy markets.

Over the past several years, OPEC+ production policy has remained a central variable in the global supply outlook. Production targets have been adjusted in response to changing market conditions, while Saudi Arabia has often taken additional voluntary measures aimed at managing the pace of supply growth. For investors, these decisions matter not only because they can influence oil prices, but also because they affect the amount of spare production capacity available during periods of market stress.

The significance of these decisions extends beyond daily commodity price movements. OPEC+ policy remains especially important because several member countries hold the market’s most closely watched spare production capacity. In effect, the group's available capacity serves as one of the few meaningful buffers against potential shocks to the global energy system.

At the same time, investors continue to monitor questions surrounding quota compliance and internal dynamics among member nations. Balancing national revenue needs, market share considerations and long-term strategic objectives has not always been straightforward, and those tensions can influence how production policies evolve over time.

For energy investors, understanding OPEC+ is not simply a matter of forecasting oil prices. The group's actions can influence corporate spending plans, project economics and, ultimately, how much spare capacity the global energy system has available when unexpected disruptions occur.

Why U.S. Shale May Look Different This Time

For much of the last decade, U.S. shale producers were viewed as the world's marginal source of supply growth. Rising prices typically led to increased drilling activity, which in turn brought new production to market and helped moderate price spikes.

Today, however, the industry's priorities appear to be changing.

A wave of consolidation has reshaped the exploration and production landscape, creating larger companies with extensive inventories and stronger balance sheets. Rather than pursuing growth at any cost, many operators have emphasized free cash flow generation, capital discipline and shareholder returns.

At the same time, industry observers continue to debate the long-term productivity outlook for key shale basins. Questions surrounding core acreage quality, drilling inventory depth and changes in drilled-but-uncompleted well inventories have contributed to a more measured outlook for future production growth.

While U.S. shale remains a critical source of global supply, many investors no longer assume it can single-handedly offset supply challenges elsewhere in the world.

As investors assess the outlook for energy markets, several interconnected themes may help shape the next phase of the energy investment cycle.

Figure 1. Several interconnected factors may influence future energy investment decisions, including demand trends, supply capacity, infrastructure development and emerging sources of electricity demand.

Together, these themes highlight the complexity of today's energy landscape and help explain why investment needs remain a central focus for producers, policymakers and investors alike.

What Geopolitics and AI Demand Mean for Energy Infrastructure

While forecasts differ on the future path of energy demand, one theme appears consistently across many scenarios: maintaining adequate energy capacity requires ongoing investment. Whether demand growth exceeds expectations, supply disruptions emerge or electricity consumption accelerates, the energy system must be prepared to meet those challenges.

Several structural factors may support that possibility. Global upstream investment remains below levels seen during previous commodity cycles despite continued demand growth. Meanwhile, many producing regions face the challenge of maintaining output from mature fields, a process that often requires ongoing drilling activity, infrastructure upgrades and enhanced recovery techniques.

Geopolitical disruptions have added another layer of complexity. Whether rebuilding damaged infrastructure, expanding export facilities or modernizing aging energy systems, these projects typically require significant capital, engineering expertise and long development timelines.

The emergence of AI and large-scale data centers highlights how difficult energy planning can be. Forecasts for future electricity demand vary widely, but many imply a need for additional generation, transmission and fuel infrastructure. While renewable energy sources are expected to play an increasingly important role, natural gas is often viewed as one potential source of dispatchable power capable of supporting grid reliability.

Collectively, these trends point toward a future in which energy security may depend as much on investment and infrastructure development as it does on resource availability.

Which Energy Sectors Could Gain as Capital Spending Rises

If maintaining adequate energy capacity requires greater investment, different segments of the energy value chain may benefit in different ways.

Oilfield Services

Oilfield services companies provide the equipment, technology and expertise that support exploration, development and production activities. Their services span drilling, completions, pressure pumping, engineering and well maintenance, making them closely tied to overall activity levels across the industry.

Because their revenues are often influenced by capital spending decisions rather than commodity prices alone, some investors view oilfield services companies as a way to gain exposure to broader investment trends within the energy sector.

Refining

Refiners occupy a different but equally important position within the energy ecosystem.

In the years following the COVID-19 pandemic, several refining facilities were permanently closed, particularly in developed markets. While new capacity has been added in parts of Asia and the Middle East, refining remains a strategically important segment of the global energy system.

Refining economics are influenced by a range of factors, including crude oil quality differentials, product demand and refining margins. Demand for diesel, jet fuel and other distillate products is also closely tied to industrial activity, freight transportation and global trade, creating a distinct set of market dynamics compared with gasoline demand alone.

As a result, some investors view refiners as another way to gain exposure to evolving energy market fundamentals.

Key Risks Facing the Energy Infrastructure Outlook

While the case for increased energy investment has attracted growing attention, several risks could alter the outlook.

A global economic slowdown could weaken energy demand and reduce the need for additional production capacity. Accelerated adoption of electric vehicles, battery storage technologies or alternative energy sources could also reduce long-term hydrocarbon demand more quickly than many forecasts currently anticipate.

Changes in OPEC+ strategy, unexpected supply growth or shifts in government policy could further affect market dynamics. In addition, energy markets remain sensitive to geopolitical developments, currency fluctuations and changes in interest rate expectations.

These uncertainties underscore the importance of evaluating multiple scenarios when assessing long-term opportunities within the energy sector.

How to Invest in the Energy Value Chain with ETFs

Investors seeking exposure to these themes may consider strategies that provide access to different segments of the energy value chain, including:

VanEck Oil Services ETF (OIH): Provides exposure to U.S.-listed companies involved in oil services, oil equipment and oil drilling activities.

VanEck Oil Refiners ETF (CRAK): Provides exposure to companies involved in crude oil refining and the production of refined petroleum products, including gasoline, diesel and jet fuel.

What the Next Energy Cycle Means for Long-Term Investors

The future direction of oil prices will remain an important consideration for energy investors. However, commodity prices alone may not tell the entire story.

The debate surrounding energy markets often centers on demand forecasts and price expectations. Yet another question may prove equally important in the years ahead: whether the global energy system has sufficient production, transportation, processing and refining capacity to meet demand under a range of possible outcomes.

Demand growth may evolve in unexpected ways, geopolitical disruptions can emerge without warning and rising electricity needs may place additional pressure on existing infrastructure. Regardless of which scenario unfolds, maintaining adequate capacity across the energy value chain will likely require continued investment.

For investors, that may make the companies responsible for building, maintaining and expanding energy infrastructure increasingly important to watch as the next phase of the energy cycle unfolds.

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• The crisis will pass. The lesson won't: COVID and Iran are different events with the same message — systems built purely for efficiency will break under stress.
• Resilience is the new growth theme: The world is shifting from decades of optimization to a multi-year rebuild of energy, manufacturing, and infrastructure.
• AI and reshoring are telling the same story: Two powerful forces are converging on the same real assets, and the opportunity is where they meet.
• The builders are already winning: Markets are rewarding companies at the center of this structural shift, and we believe the trend has significant runway ahead.

A Reason to Celebrate

Markets rallied on news of an initial deal with Iran. They should. Lower and more stable oil prices ease inflation and reduce a threat to growth.

Got it.

Source: Truth Social, 6/14/26.

A Reason to Pause

We are not out of the woods yet.

Since the conflict began, President Trump repeatedly declared victory. The deal was days away. Then weeks away. Then days away again. Today we appear genuinely closer to resolution. That is encouraging. But the last several months should remind us that geopolitical conflicts rarely follow a straight line.

A positive outcome is not the only possible outcome.

Source: Truth Social, 6/21/26.

If the agreement falters and oil prices rise materially, inflation reaccelerates. That alone is manageable. What is not manageable is a Fed that panics and responds with easy money. Iran would be the spark. The Fed would be the fan. That combination could produce a second inflationary wave not unlike 2022.

We don't expect that to happen. The deal will hold. Neither side will be completely satisfied, both will act up, and eventually both will declare victory. That is how these things end.

The chart below compares the current inflation regime to the inflation regime of the 1970s. It shows how historical inflation regimes typically present in waves. At this point, we believe that the current inflation spike will not transform into an inflation wave.

But that is not the big story.

The Wave that Wasn’t

Source: BLS, 05/2026. Past performance is not a guarantee of future results. Estimates may not materialize as predicted and are subject to change.

The Second Wake-Up Call

The big story is that this is the second time in five years we have been reminded how fragile the systems we depend on truly are.

COVID was the first wake-up call.

Most of us remember walking into grocery stores and finding empty shelves. It was jarring. The extraordinary efficiencies built over decades collapsed the moment the system was stressed.

Iran was the second.

A country on the other side of the world threatened a single chokepoint responsible for roughly 20% of the world's oil supply. The result was an immediate energy shock. This chart shows the tanker vessel crossings plummet in the Strait of Hormuz.

The Day the Strait Went Silent

Source: Bloomberg, 6/18/26. Past performance is not a guarantee of future results. Estimates may not materialize as predicted and are subject to change.

At first glance, the two events appear unrelated. One was a pandemic. The other was a geopolitical conflict.

Both exposed the same flaw: critical systems are only as strong as their weakest link.
Iran was not the story. Iran was the reminder.

The Lesson

COVID was temporary. The lesson was not.

Iran will prove temporary too. The lesson is not.

For decades, the global economy was built for efficiency. Lower costs. Higher margins. Lean supply chains. Just-in-time everything. It produced extraordinary productivity and cheaper goods.

It also produced a system with almost no slack. Anything pushed to an extreme eventually breaks. Even globalization.

The next system will be built differently. Not for efficiency alone, but for efficiency and resilience. That means more domestic manufacturing, more energy security, more critical mineral production, more infrastructure, and more redundancy throughout the system.

Put simply: we expect to rebuild at home critical industries that today exist abroad.

Not because we want to. Because we must. And we are unlikely to be alone. Much of the developed world is reaching the same conclusion.

That is one of the key forces behind the next great global infrastructure buildout.

Building the Future

This shift did not begin with COVID and will not end with Iran. Both events accelerated a trend already underway.

Governments and corporations are increasingly willing to pay for security and redundancy. That means more manufacturing, more energy investment, more power generation, more grid modernization, more critical mineral development, and more security across the board.

In short: more spending.

But the story goes beyond reshoring.

At the same time the world is rebuilding for resilience, it is building for a new technological era. For most of human history, knowledge was scarce. Artificial intelligence is ending that scarcity. That changes everything.

But AI does not scale without real assets. The new world does not happen without the old world building it.

AI and reshoring are driving demand for the same things: power generation, critical minerals, manufacturing capacity, and infrastructure.

Different forces. Same destination.

Markets are already rewarding the beneficiaries. The UBS US Reshoring Index, which includes companies such as Caterpillar, Rockwell Automation, Steel Dynamics, and United Rentals, has outperformed the S&P 500 Index over the past three years. These are not AI companies. They are the companies building the world AI requires.

The Builders are Winning

Source: Bloomberg, 06/18/26. Past performance is not a guarantee of future results. Estimates may not materialize as predicted and are subject to change.

The world is moving from the economy we know today to one shaped by artificial intelligence. Getting there requires one of the largest infrastructure buildouts in modern history. What began as a technology spending cycle is becoming a global infrastructure upgrade cycle.

Where We See Opportunity

The market is focused on whether the Iran deal holds.

We are focused on what it reminded us of.

COVID exposed the supply chain fragility. Iran exposed the energy system fragility. Artificial intelligence is accelerating infrastructure demand.

These are not separate trends. They are reinforcing each other.

The world spent decades building for efficiency. It may spend the next decade or two building resilience.

The crisis will pass.

The trend will not.

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• WARP added SpaceX on June 22, 2026, after it listed publicly and met index rules.
• WARP’s underlying index fast-track rule for large IPOs enabled timely inclusion at the 20% weight cap.
• SpaceX’s public debut has drawn renewed attention to the broader space theme and related ETF flows.

SpaceX Update (June 22, 2026):
SpaceX (SPCX) began trading on Nasdaq on June 12, 2026. Following the MarketVector Space Index (MVWARP) methodology’s provision for large IPOs, SpaceX has been added to WARP at the index’s 20% maximum security weight as of today. This addition follows MVWARP’s rules-based process entirely: a company meeting the eligibility, size, and free-float criteria is added according to methodology, independent of market attention or investor enthusiasm. The 20% cap is a deliberate feature designed to allow meaningful exposure to a dominant constituent while limiting single-name concentration. WARP’s differentiated value remains its focused, rules-based core exposure to the long-term space theme. As always, feel free to reach out with any questions.

SpaceX Update (June 12, 2026):
On the eve of SpaceX’s debut, S&P Dow Jones Indices reaffirmed that it will not bend its eligibility rules to fast-track large, newly public companies into the S&P 500. After a consultation that proposed shortening the 12-month seasoning period and waiving profitability and public-float requirements for the biggest IPOs, S&P concluded that exceptions should not be granted on the basis of market capitalization alone. The practical effect is that SpaceX, which begins trading today on the Nasdaq will not be greeted by forced buying from the trillions of dollars in funds that track the S&P 500, even as it qualifies for fast entry into other major benchmarks like the Nasdaq-100 and the Russell 1000. For a company that reported a sizable GAAP loss in its most recent quarter, that distinction is the point. S&P’s framework, like WARP’s, is built to let a newly public business establish a trading history and demonstrate financial viability before passive capital flows in. Importance to a theme, or sheer size, does not override the rules, a reminder that eligibility, not enthusiasm, determines inclusion.

Now that SpaceX is publicly available, will it be added to an ETF immediately?

For a rules-based ETF like the VanEck Space ETF (WARP), the answer is yes. SpaceX was added on June 22, 2026, at the index’s 20% maximum weight due to it meeting the eligibility requirements of the underlying index. SpaceX’s popularity and importance to the space economy did not lead to its inclusion, satisfying the index rules did.

Why Shouldn’t an ETF Own SpaceX Before the IPO?

Certain investors can gain private-market exposure to companies before they go public, including through special purpose vehicles, private funds, or other secondary-market structures. These vehicles can offer early access, but they can also introduce tradeoffs, such as limited liquidity, valuation uncertainty, transfer restrictions, lockups, additional fees, and less transparency than public equity ownership.

ETFs operate differently. ETFs are built around daily transparency, daily liquidity, and a clear creation/redemption process. Owning a private vehicle instead of public shares can create complications around these.

That is why, in our view, waiting for public-market eligibility is the more prudent approach for adding new entrants to an ETF.

WARP’s Framework for Adding Potential SpaceX Exposure

WARP tracks the MarketVector Space Index (MVWARP), a rules-based index focused on publicly traded companies tied to the space economy. The index methodology determines which companies are eligible, when they may be added, and how large each position can be. For newly public companies, this process depends on the size of the IPO and when it happens relative to the index’s quarterly rebalance calendar.

^* Free float, or public float, is the percentage of outstanding shares available for the public to trade.

This process helps remove discretion from the decision. If a company qualifies, it can be included according to the methodology. If it does not qualify, it is not added simply because it is popular or because investors are paying attention.

SpaceX is clearly central to the modern space economy, with businesses across launch services, satellite communications, and related infrastructure. But importance to an industry is not the same thing as index eligibility. For WARP, the public listing, share-class eligibility, free-float requirements, revenue exposure, and index timing rules all matter.

WARP’s SpaceX exposure is not about trying to get ahead of the market through a private vehicle. It provides exposure once the company becomes eligible under a transparent public-market framework. That may also mean that a newly public company is not added on its first day of trading. While every IPO is different, the period immediately following a high-profile listing may involve heightened volatility as investors establish a market price and trading liquidity develops. Waiting until a company meets index eligibility requirements allows some of that price-discovery process to occur before the stock is incorporated into the index.

Public Shares Better Suited for ETFs Than Private Market Exposure

Once a company is publicly listed, investors gain a clearer market price. Shares trade on an exchange. Liquidity can be observed. Index providers can apply their methodologies. ETF portfolio managers can buy, sell, and rebalance in line with the fund’s rules.

That does not eliminate risk. Public shares can still be volatile, especially after a high-profile IPO. But the exposure is cleaner and more transparent than relying on a private structure that may have its own restrictions.

For ETF investors, that transparency matters. They can see what the fund owns. They can see the position size. They can see how the holding fits into the broader portfolio. And they can access the ETF intraday through the public market.

Since SpaceX met the index requirements, it was added to WARP according to the index methodology. That approach reflects the purpose of a rules-based ETF. It requires a company to become eligible and then be added according to the rules.

WARP is not designed to speculate on private-market access. It is designed to provide transparent, exchange-traded exposure to companies that meet the index’s definition of the investable space economy.

Effects of SpaceX’s Public Debut May Extend Across the Sector

Index-tracking funds may need to buy shares when a company enters their benchmark. If the available public shares are limited, that buying can become an important part of short-term trading dynamics. This does not guarantee any specific outcome for the stock price, and index inclusion is never automatic. But it is a factor investors should understand.

For thematic investors, index inclusion may affect more than one company. A major public listing can draw attention to an entire industry, influence flows into related ETFs, and create renewed interest in companies connected to the same theme. However, investors should be careful not to treat index inclusion as an investment thesis by itself. The more durable question is whether the company and the broader space economy can support long-term growth.

Eligibility Before Exposure: The WARP Approach to a Potential SpaceX IPO

SpaceX’s listing has proven to be one of the most significant public-market events for the space industry. For ETF investors, how exposure is obtained matters just as much as whether exposure is obtained.

That process has now played out as intended. SpaceX was added to WARP on June 22, 2026, according to the index methodology. Investors gained exposure through a transparent, rules-based framework that emphasizes liquidity and established market pricing.

That may be less flashy than owning a private wrapper before an IPO. But for a transparent ETF structure, it is the more prudent path.

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• Reusable rockets changed the economics of space. SpaceX turned launches into repeatable commercial operations, making new space business models viable.
• Lower launch costs underpin the entire space economy. Broadband, defense, and orbital infrastructure all depend on affordable, frequent access to orbit.
• SpaceX is a space infrastructure platform, not just a rocket company. Starlink's growth shows how launch capabilities fuel a flywheel of recurring revenue.
• For investors, structure matters as much as access. "SpaceX exposure" varies widely across vehicles in liquidity, fees, and what you actually own.

SpaceX Update (June 22, 2026):
SpaceX (SPCX) began trading on Nasdaq on June 12, 2026. Following the MarketVector Space Index (MVWARP) methodology’s provision for large IPOs, SpaceX has been added to WARP at the index’s 20% maximum security weight as of today. This addition follows MVWARP’s rules-based process entirely: a company meeting the eligibility, size, and free-float criteria is added according to methodology, independent of market attention or investor enthusiasm. The 20% cap is a deliberate feature designed to allow meaningful exposure to a dominant constituent while limiting single-name concentration. WARP’s differentiated value remains its focused, rules-based core exposure to the long-term space theme.

SpaceX Update (June 12, 2026):
On the eve of SpaceX’s debut, S&P Dow Jones Indices reaffirmed that it will not bend its eligibility rules to fast-track large, newly public companies into the S&P 500. After a consultation that proposed shortening the 12-month seasoning period and waiving profitability and public-float requirements for the biggest IPOs, S&P concluded that exceptions should not be granted on the basis of market capitalization alone. The practical effect is that SpaceX, which begins trading today on the Nasdaq will not be greeted by forced buying from the trillions of dollars in funds that track the S&P 500, even as it qualifies for fast entry into other major benchmarks like the Nasdaq-100 and the Russell 1000. For a company that reported a sizable GAAP loss in its most recent quarter, that distinction is the point. S&P’s framework, like WARP’s, is built to let a newly public business establish a trading history and demonstrate financial viability before passive capital flows in. Importance to a theme, or sheer size, does not override the rules, a reminder that eligibility, not enthusiasm, determines inclusion.

SpaceX IPO: What Reusable Rockets Mean for Investors

For decades, space captured the imagination of scientists, governments, and investors. But for much of that time, space was more of a frontier than a functioning commercial market. The ambition was clear. The economics were not.

That is what makes SpaceX so important.

The excitement around the SpaceX IPO was not about another high-profile company entering the public markets, but the possibility that SpaceX has helped change the cost structure of space itself. By developing reusable rockets, the company has made launches more frequent, more reliable, and potentially more economical. That matters because lower-cost access to orbit is the foundation on which a broader commercial space economy can be built.

An easy way to think about it is air travel.

"Commercial aviation would never have scaled if every flight required discarding the airplane after one trip."

Historically, rockets worked much closer to that disposable model, for example the shuttle was reusable but rockets that got it to orbit were not. SpaceX's reusable launch technology changed that equation by allowing the most expensive parts of the rocket to be flown again.

How Are Lower Launch Costs Expanding the Space Economy?

That shift may sound technical, but its implications are very practical. If it becomes cheaper and easier to reach orbit, more business models become possible. Satellite broadband, global communications, defense applications, earth observation, space logistics, lunar infrastructure, and future orbital services all depend on one basic requirement: access to space must become less expensive and more repeatable.

Lower Launch Costs Are Expanding the Viable Space Economy

Source: SpaceX (March 2026). NASA/CSIS. AEI. BryceTech (Apr 2024). Space Foundation. Jonathan McDowell/Payload Space.

That is why reusable rockets are central to the SpaceX story. They are the economic engine that helps make the rest of the company's ambitions more credible.

Why Is SpaceX Considered More Than a Rocket Company?

The most visible part of SpaceX is its launch business. Rockets make headlines. Landings make videos. But the broader investment conversation has increasingly shifted toward what reusable launch enables.

Starlink is the clearest example.

Starlink Subscriber Growth Shows Satellite Broadband Is Here To Stay

Source: SpaceX, Broadband breakfast (2026), SDxCentral (2026), DISHYtech (2025). For illustrative purposes only. Not intended as a forecast or prediction of future results.

What Does Starlink's Growth Tell Us About the Satellite Broadband Market?

By using its own launch capabilities to deploy a large satellite network, SpaceX created a global broadband business built on top of its core launch infrastructure. This creates a powerful business flywheel: rockets help deploy satellites, satellites help generate recurring revenue, and that revenue can support further investment in launch systems, satellite networks, and future technologies.

This is one reason the company is often discussed less like a traditional aerospace manufacturer and more like an infrastructure platform. SpaceX is building the tools, transportation systems, and networks that could support a larger space-based economy over time.

That distinction matters. Investors are not only trying to value what SpaceX is today. They are trying to understand what it could become if lower-cost access to space unlocks new markets over the next decade and beyond.

Why Has the SpaceX IPO Attracted So Much Investor Attention?

The IPO has drew significant attention because SpaceX sits at the center of several major themes at once.

SpaceX is one of the most widely known private companies in the world

For years, most public-market investors had limited direct access to SpaceX, even as the company grew in size, visibility, and strategic importance. That scarcity has created pent-up demand.

SpaceX is tied to multiple long-term growth areas

It is connected to satellite broadband, national security, launch services, global communications, and potentially future space infrastructure. The company's role in these markets gives investors a way to think about SpaceX as more than a single-product business.

SpaceX has reshaped what is possible with reusable rockets

Reusable rockets have made launches feel less like rare national events and more like repeatable commercial operations. That change in perception is important. Markets often assign greater value to companies that appear to expand the size of the opportunity itself.

SpaceX has become a symbol of the private-market growth story

Many investors have watched large private companies remain private for longer, capturing substantial value before public investors have a chance to participate. The SpaceX IPO was more than a listing, it was the test of how public markets value one of the most important private companies of the last two decades.

Why Have Investment Funds Been Built Around SpaceX Exposure?

The number of funds and investment vehicles seeking SpaceX exposure reflects a simple reality: demand exists before direct access is widely available.

Some funds have tried to provide access through private shares, special purpose vehicles, closed-end fund structures, interval funds, or portfolios that include SpaceX alongside other public and private companies. These vehicles differ meaningfully in liquidity, expenses, transparency, concentration, and the type of SpaceX exposure they provide.

That point is important for investors. "Exposure to SpaceX" does not always mean the same thing across investment products. One fund may hold preferred shares. Another may own an interest through a private vehicle. Another may provide only partial or indirect exposure as part of a broader portfolio.

For retail investors, the key takeaway is not that SpaceX exposure exists, but that the structure matters. Access, liquidity, fees, valuation methodology, and concentration can all meaningfully affect the investor experience.

Why Might Investors Pay a Premium for SpaceX Stock?

A premium valuation also means more room to fall. If growth disappoints, the stock can decline sharply and investors may lose money — there is no guarantee SpaceX will achieve what its valuation implies.

The premium attached to SpaceX reflects the possibility that the company may sit at the center of a much larger future market.

That does not mean the valuation is risk-free. Companies priced for large future opportunities can be sensitive to execution delays, competition, regulation, capital needs, and changing investor expectations. Space is also technically difficult, capital intensive, and dependent on complex supply chains and government relationships.

But the reason investors may be willing to pay a premium today is that SpaceX is viewed by many as a category-defining company. If reusable rockets continue to lower the cost of reaching orbit, and if Starlink and other services continue to scale, SpaceX could benefit from multiple growth drivers at once.

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• Evergreen and semi-liquid structures are expanding access to private markets.
• Underlying private assets remain structurally illiquid despite periodic liquidity features.
• Slower IPO and M&A activity can extend liquidity timelines and impact distributions.
• Secondary markets are becoming increasingly important liquidity solutions.
• Investors should carefully align private market exposure with liquidity needs and portfolio objectives.

As private markets continue to expand, demand for greater access from wealth management and retail channels have accelerated in recent years. Historically, many private market strategies were largely limited to institutional investors and ultra-high-net-worth individuals.

A wider range of investors today have access as asset managers launch different types of fund structures with features designed to expand access, including by broadening eligibility, lowering minimum investments, improving subscription and tax administration, and incorporating partial liquidity.

The most frequently used structures are interval and tender offer funds (sometimes referred to as semi-liquid evergreen funds), which are closed-end funds under the Investment Company Act of 1940. According to XA Investments, the interval and tender offer fund market reached a new high of 308 funds with $233 billion in net assets as of December 31, 2025, a $61 billion increase from 2024.

Expanding Access Does Not Eliminate Illiquidity

While demand for these alternative investment structures is expected to continue, it is vital for financial advisors and investors to understand that (i) the underlying assets in areas like venture capital (VC) and broader private equity are structurally illiquid, and (ii) a longer-term holding period of at least 3-5 years should be expected to properly benefit from these types of strategies.

These investment strategies are not designed for shorter-term investment horizons, even if the underlying fund structures allow for some level of periodic liquidity.

Compressed exit activity has created net cash flow challenges for the venture ecosystem in recent years as the ratio of capital distributions to contributions remains at multi-decade lows, as illustrated in the following chart. An investor seeking liquidity in this type of environment may experience significant discounts to the fair market value of their positions.

U.S. VC Cash Flows ($B)

Source: Q1 2026 Pitchbook-NVCA Venture Monitor.

However, the ratio of distributions to net asset value (NAV) has come off recent lows and is showing signs of improvement as exit activity picks up, which is a positive development for the ecosystem. Despite ongoing geopolitical and macro uncertainty, we believe there is a strong set up for both M&A and IPO activity to accelerate through 2026 and potentially set new records.

U.S. VC 12-month Distribution Yield as a Share of NAV

Source: Q1 2026 Pitchbook-NVCA Venture Monitor.

Despite these recent improvements to exit activity, secondary transaction volume is reaching record levels as General Partners (GPs) of funds, Limited Partners (LPs) of funds and underlying portfolio companies (including founders, employees, etc.) have greater demand for liquidity solutions. Fortunately, the continued institutionalization of private markets and maturation of secondaries now provides the ability for these various constituents to achieve liquidity through various transaction structures. We anticipate secondary activity to continue accelerating for the foreseeable future.

Secondary Transaction Volume ($B)

Source: Lazard 1H 2026 Secondary Market Report.

Private Markets Are Becoming Core Portfolio Considerations

The growth of private markets reflects a significant structural change across global capital markets, particularly in the U.S. The line between private and public markets has blurred, while strategies such as VC are likely to continue serving as the key drivers of innovation and disruption outside listed markets.

The question is no longer whether investors should allocate capital to private markets, but rather how to effectively construct a portfolio that incorporates long-duration private assets while addressing the investors’ objectives and needs.

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• Morningstar’s March reassessment of software companies drove a larger-than-usual portion of the Index’s turnover this quarter.
• Style exposure remained mostly in line with the prior quarter’s, with value remaining a notable overweight.
• Contrarian positioning remains with 22% discount to fair value, according to Morningstar’s price to fair value ratio.
• Sector shifts continue to be led by a decrease in industrials and tech and an increase in consumer discretionary and financials.

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.

Moat Index Review Highlights:

• Moat Ratings, Not Valuations, Drive Turnover

  Economic moat rating downgrades resulting from the March 2026 AI-inspired reevaluation of moat ratings drove turnover during the review. While valuations are typically the key driver of turnover, moat rating downgrades accounted for 7 of the 12 stocks deleted this quarter, comprising primarily of software companies.

• Tech Names Quietly Added, Despite Deletions

  Despite the decrease in tech exposure, several cheap tech names were added during the review. Broadcom, Fair Isaac, Guidewire, Jack Henry & Associates, and Amphenol were all added due to their attractive price to fair value. These additions were slightly overshadowed by deletions from highfliers such as NXP Semiconductors and cybersecurity company Fortinet as well as software moat rating downgrades referenced above.

• Sector Shifts

  Consumer discretionary, financials and health care saw the largest increases in absolute weight during the review. Industrials, a sizable overweight in quarters past, continued its march toward lower exposure in the Index. Technology's decline now places the sector at the Index's largest underweight, a greater than 10% gap versus the S&P 500 Index.

2Q 2026 Moat Index Review Results

Moat Index Sector Shifts Following 2Q 2026 Review

Moat Index Sector Exposure Relative to S&P 500 Index

Moat Index Style Exposure Relative to S&P 500 Index: Value Bias Persists

Source: Morningstar. As of 6/18/2026 unless otherwise noted. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Access Quality Companies at Attractive Valuations

VanEck Morningstar Wide Moat ETF (MOAT) and VanEck Morningstar Wide Moat Fund seek to replicate as closely as possible, before fees and expenses the price and yield performance of the Morningstar Wide Moat Focus Index.

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• China is building a domestic semiconductor ecosystem across the entire value chain.
• Tighter export controls have accelerated demand for domestic chip alternatives.
• Sovereign capital is helping fund China's push for semiconductor self-sufficiency.
• Traditional semiconductor funds provide little to no exposure to this theme.
• SMHC offers targeted exposure to companies driving to China's semiconductor buildout.

Most semiconductor allocations today are concentrated in US and Taiwanese companies, capturing the design and fabrication layers of the global supply chain. But there’s a completely separate semiconductor ecosystem that they’re missing.

Driven by sovereign capital and structural forces that have only grown stronger over the past several years, China is building a domestic semiconductor industry spanning chip design, manufacturing, equipment and packaging. For investors, that means exposure to companies largely absent from traditional semiconductor allocations.

The VanEck China Semiconductor ETF (SMHC) is designed to access that opportunity directly. It tracks the MarketVector China Semiconductor 25 Index, which targets 25 of the largest and most liquid Chinese companies across the semiconductor value chain, from design and manufacturing to advanced packaging. The companies in this index do not appear in conventional semiconductor or broad China equity strategies, making this exposure additive to most portfolios.

The scale of this ambition is perhaps best illustrated by Huawei. Despite being cut off from U.S. chips and chip-making technology, Huawei has continued to develop its own semiconductor capabilities through its HiSilicon design unit, producing chips that power its smartphones, networking equipment and AI infrastructure. Huawei is privately held and not directly investable. However, its trajectory reflects the broader push across China's semiconductor industry, and the companies supplying that industry are publicly traded.

The investment case rests on three reinforcing forces: the scale of China's domestic semiconductor build-out, the push for localization created by US export controls, and the sovereign capital backing the entire effort.

China Is Building the World's Largest Chip Manufacturing Base

Semiconductors are the foundational building blocks of every electronic device, from smartphones to data centers to cars, and China sits at the center of this global industry both as a consumer and, increasingly, as a producer.

In 2025, China was the world's single largest spender on semiconductor manufacturing equipment. This reflects how much fabs are spending on the physical tools used to build chips, including lithography systems, etch tools, and deposition equipment. It is a measure of where the industry's infrastructure is being constructed, and the answer is overwhelmingly China.

China Leads 2025 Spend on Semiconductor Manufacturing Equipment

Source: SEMI as of April 2026. Past performance is no guarantee of future results. Not intended as a forecast or prediction of future results. For illustrative purposes only.

That level of investment indicates a deliberate national priority. China consumes a substantial share of all semiconductor devices used in locally assembled electronics globally, but its domestic production has historically fallen well short of that consumption. Closing that gap has become one of the most consequential industrial policy objectives of the current era, and the financial results are already showing up. The combined revenues and market capitalizations of SMHC's index constituents have grown dramatically since 2019, driven by domestic demand and forced localization.

Domestic Tailwinds Drive Up SMHC Constituent Revenues and Market Caps

Source: VanEck, MSCI. Chinese semiconductor companies represented by Semiconductor and Semiconductor Manufacturing companies in the MSCI China IMI Index as of 5/31/2026. See important disclosures and index descriptions at end.

China’s Semiconductor Model Stands Apart from the U.S.

Understanding how the U.S. and Chinese semiconductor ecosystems differ structurally helps illustrate why this opportunity is distinct from existing semiconductor allocations.

The U.S. model is built around design concentration and manufacturing outsourcing. A small number of dominant fabless companies, including Nvidia, Qualcomm, Broadcom, and AMD, design the world's most advanced chips and outsource their fabrication to foundries in Taiwan, primarily TSMC. The equipment those foundries use comes largely from U.S. and European suppliers, while packaging and testing happens across Asia. The U.S. captures extraordinary value in the design layer but is structurally dependent on foreign manufacturing for everything downstream.

China is building something different. Rather than specializing in one layer of the stack, China is constructing every layer simultaneously and domestically, covering fabless design, foundry capacity, manufacturing equipment and advanced packaging. The goal, as articulated through state policy, is a self-sufficient semiconductor supply chain with zero foreign dependency. That goal remains distant, but the trajectory is clear and the investment is sustained.

Source: VanEck, MSCI.

The practical implication for investors is that these are two separate universes of companies and no overlap between SMHC and existing U.S.-listed semiconductor funds. An investor who holds conventional semiconductor exposure has none of the Chinese companies capturing this domestic build-out.

Restrictions Accelerated China’s Domestic Chip Build-Out

The relationship between US export controls and China's semiconductor investment is one of the more counterintuitive dynamics in markets today. The conventional expectation would be that restrictions slow China's development. The evidence suggests the opposite.

Since 2019, the U.S. has progressively tightened controls on the technology China can access, including adding Huawei and SMIC to the Entity List, restricting access to U.S. technology and suppliers. This expanded in October 2022 with sweeping controls on advanced chip exports and semiconductor manufacturing equipment. The U.S. then coordinated with the Netherlands and Japan to restrict ASML and Tokyo Electron equipment sales in 2023, before expanding controls further in 2024 and 2025. At each step, China's domestic equipment spending has accelerated rather than contracted, creating stronger incentive for Chinese companies to localize the supply chain.

China’s Equipment Spending Grew as Export Controls Expanded

Source: VanEck, SEMI as of April 2026. These are not recommendations to buy or to sell any security. Securities and holdings may vary. For illustrative purposes only.

The mechanism is straightforward. Each restriction creates a procurement mandate that may benefit a local provider. Chinese fabs that can no longer source ASML lithography systems may source from NAURA. Chinese data centers that cannot purchase Nvidia GPUs may source from Cambricon. Chinese telecom operators have been directed to remove all foreign semiconductors from their networks by 2027. Every foreign supplier locked out of the Chinese market creates a potential customer for a domestic Chinese company. The geopolitical pressure that makes this investment feel risky is the same force making the revenue opportunity structural and durable.

Foreign Supplier Restrictions Create Domestic Beneficiaries

Source: VanEck. These are not recommendations to buy or to sell any security. Securities and holdings may vary. For illustrative purposes only.

China and U.S. Take Different Paths to Semiconductor Funding

Underpinning China’s build-out is a level of state financial commitment that has no real equivalent in Western industrial policy.

China's National IC Fund has committed approximately $98 billion across three phases since 2014, including a $47.5 billion commitment launched in May 2024. That capital is deployed through directed procurement, subsidized fab construction, and preferential financing from state banks. The scale is significant, but so are the structural risks: state-directed investment at this magnitude has historically produced overcapacity and boom-bust cycles, and below-market financing can sustain uneconomic capacity over time.

How Scale, Structure and Risks Differ

Source: CHIPS and Science Act (Public Law 117-167), Commerce Office of Inspector General, Status Report OIG-25-021-I, Document 79 (2022 SASAC directive), State Council Guo Fa No. 8, Beijing Municipal Administration for Market Regulation on May 24, 2024. For illustrative purposes only.

The contrast with U.S. industrial policy is meaningful. The CHIPS Act appropriated $52.7 billion in 2022, of which $39 billion was earmarked for manufacturing incentives. Grants are capped at 5 to 15% of total project cost, requiring private co-investment to unlock the rest, and awards are subject to performance conditions and contractual guardrails. As of January 2025, approximately $33.7 billion has been awarded. The first award was not finalized until September 2024, more than two years after enactment.

The two approaches differ in scale, structure, and risk profile. China's capital is larger and faster-moving, while the U.S. model is more conditional and slower to deploy. Both carry real tradeoffs.

Invest in China’s Semiconductor Build-Out with SMHC for Pure Play Exposure

SMHC tracks the MarketVector China Semiconductor 25 Index, a rules-based index designed to provide pure-play exposure to the Chinese semiconductor industry.

Eligibility begins with a revenue purity screen, which requires companies to be headquartered or incorporated in China or Hong Kong and derive at least 50% of its revenues from semiconductors or semiconductor equipment. This ensures that every constituent is a meaningful participant, rather than a diversified technology conglomerate with incidental chip exposure.

From this universe, 25 companies are selected based on a combination of scale and liquidity, to ensure the portfolio remains investable. Constituents are weighted using a modified free-float market capitalization approach, with individual caps and concentration limits to balance exposure to the largest names with representation across the broader opportunity set. The index is reconstituted semi-annually and rebalanced quarterly.

For investors looking for access to China's domestic semiconductor build-out, the VanEck China Semiconductor ETF (SMHC) offers a direct path to a theme that remains largely absent from traditional semiconductor allocations.

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The VanEck China Semiconductor ETF (SMHC) is designed to provide targeted exposure to companies participating in that build-out. This Q&A explores the industry, the investment case, and how SMHC seeks to provide exposure to this opportunity.

• Why is China building its own semiconductor industry?
• How does China's semiconductor ecosystem differ from the U.S. model?
• How have U.S. export controls affected China's domestic semiconductor industry?
• How is China's semiconductor build-out funded?
• What is the VanEck China Semiconductor ETF (SMHC)?
• How does SMHC's index work?
• What are the key risks of investing in SMHC?
• How does SMHC fit in a portfolio?

Why is China building its own semiconductor industry?

China is the world's largest consumer of semiconductors, yet domestic production has historically fallen well short of that demand. Closing that gap has become a strategic priority, as policy makers seek to reduce reliance on foreign technology.

In 2025, China was the world's largest spender on semiconductor manufacturing equipment, highlighting the pace of development and reflecting a deliberate national priority. Rather than focusing on one layer of the supply chain, China is constructing every layer simultaneously and domestically: fabless design, foundry capacity, equipment, and packaging. The goal, as set by state policy, is a fully self-sufficient semiconductor supply chain with zero foreign dependency.

China Leads 2025 Spend on Semiconductor Manufacturing Equipment

Source: SEMI as of April 2026. Past performance is no guarantee of future results. Not intended as a forecast or prediction of future results. For illustrative purposes only.

How does China's semiconductor ecosystem differ from the U.S. model?

The U.S. model is built around design concentration and manufacturing outsourcing. A few dominant fabless companies, including Nvidia, Qualcomm, Broadcom, and AMD, design the world's most advanced chips. Fabrication is then outsourced to foundries in Taiwan, primarily TSMC. The U.S. captures extraordinary value in the design layer but is structurally dependent on foreign manufacturing for downstream activities.

China is building every layer, from design and manufacturing to equipment, and packaging. An investor who holds conventional semiconductor exposure has none of the Chinese companies capturing this domestic build-out.

Source: VanEck, MSCI.

How have U.S. export controls affected China's domestic semiconductor industry?

Restrictions have increased the incentive for China to develop domestic alternatives and accelerated the build-out, rather than slowing it.

Since 2019, the U.S. has progressively tightened controls on China's access to technology. Notable actions included restrictions on Huawei and SMIC, sweeping export controls on advanced chips and equipment in October 2022, and coordinated measures with the Netherlands and Japan to restrict ASML and Tokyo Electron sales in 2023. Controls expanded further in 2024 and 2025.

The result of these measures has been to increase emphasis on localization, as each restriction creates a procurement mandate with the potential to benefit a local provider. Chinese fabs that can no longer source etch and deposition tools from Applied Materials or Lam Research may source from NAURA. Chinese data centers that cannot purchase Nvidia GPUs may source from Cambricon. The geopolitical pressure that creates uncertainty for investors may also support a more durable opportunity.

China’s Equipment Spending Grew as Export Controls Expanded

Source: VanEck, SEMI as of April 2026. These are not recommendations to buy or to sell any security. Securities and holdings may vary. For illustrative purposes only.

How is China's semiconductor build-out funded?

Government support has been a significant driver of China's semiconductor development. Since 2014, China's National IC Fund has committed approximately $98 billion across three funding phases, including a $47.5 billion funding round in May 2024. That capital is deployed through directed procurement, subsidized fab construction, and preferential financing from state banks. With this scale comes structural risks, including potential overcapacity, boom-bust cycles, and below-market financing, which can sustain uneconomic capacity over time.

In comparison, the U.S. CHIPS Act appropriated $52.7 billion in 2022, of which $39 billion was earmarked for manufacturing incentives. As of early 2025, approximately $33.7 billion had been awarded. Grants are capped at 5 to 15% of total project cost, with funding tied to performance conditions and contractual guardrails. China's capital is larger and faster-moving, while the U.S. model is more conditional and slower to deploy. Both carry tradeoffs.

U.S. vs China Semiconductor Funding: How Scale, Structure and Risks Differ

Source: CHIPS and Science Act (Public Law 117-167), Commerce Office of Inspector General, Status Report OIG-25-021-I, Document 79 (2022 SASAC directive), State Council Guo Fa No. 8, Beijing Municipal Administration for Market Regulation on May 24, 2024. For illustrative purposes only.

What is the VanEck China Semiconductor ETF (SMHC)?

SMHC is a passively managed ETF that seeks to track the MarketVector China Semiconductor 25 Index. The index targets 25 of the largest and most liquid Chinese companies across the semiconductor value chain, from chip design to manufacturing equipment to advanced packaging.

Most semiconductor ETFs are concentrated in U.S. and Taiwanese companies, capturing the design and fabrication layers of the global supply chain but not the parallel build-out happening inside China. The companies in this index are not represented in conventional semiconductor or broad China equity strategies.

How does SMHC's index work?

The MarketVector China Semiconductor 25 Index is a rules-based index designed to provide pure-play exposure to the Chinese semiconductor industry.

A company must be headquartered or incorporated in China or Hong Kong and derive at least 50% of its revenues from semiconductors or semiconductor equipment to be qualify for inclusion. This eligible universe is then screened for size and liquidity, with minimum requirements including a market cap of at least $150 million and average daily trading volume of at least $1 million. The index targets 25 constituents based on a combination of free-float market capitalization and three-month average daily trading volume.

The index uses a modified free-float market capitalization weighting approach, with individual position caps to balance exposure across the portfolio. The index reconstitutes semi-annually in March and September and rebalances quarterly.

What are the key risks of investing in SMHC?

Investing in SMHC involves both country-specific and industry-specific concentration risk. China policy risk is significant, including government intervention, trade tensions or sanctions, and potential conflict over Taiwan could cause sudden and severe losses. Semiconductor companies also face rapid technological obsolescence, high capital costs, and intense pricing pressure. The sovereign capital underpinning China's build-out carries its own risks, including potential overcapacity and debt overhang from below-market financing.

For a complete list of risks, please read the fund prospectus carefully before investing.

How does SMHC fit in a portfolio?

SMHC is designed to fill a gap in existing allocations. Chinese semiconductor companies do not appear meaningfully in conventional semiconductor ETFs, which are concentrated in U.S. and Taiwanese names, or in broad China equity strategies, which are dominated by consumer, internet, and financial companies. Investors with either or both of these of exposures have no meaningful allocation to China's domestic semiconductor build-out.

SMHC provides targeted, pure-play access to that opportunity through a rules-based, liquid vehicle of 25 names, and provides additive exposure to existing semiconductor and China allocations.

How to buy VanEck ETFs?

Learn more here.

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• AI leadership rotated rather than reversed: Memory and broader semiconductor names led the Period, with Micron Technology (MU) up 28.3% and Marvell Technology (MRVL) rallying, even as crowded bellwether NVIDIA (NVDA) fell 13.1%.
• Macro risk reasserted itself: Firm labor data, renewed inflation concern, and geopolitical and energy pressure left the market rewarding visible earnings and AI-linked growth but punishing valuation risk, with the Nasdaq Composite down 3.0% and the S&P 500 off 1.3% over the Period.
• Crypto-linked exposure was the biggest drag: Strategy Inc. (MSTR) slid 35.7%, underperforming bitcoin's 22.2% decline on treasury-structure and mNAV-premium (the multiple of net asset value at which the company's stock trades relative to its bitcoin holdings).

Market Backdrop: AI Strength Meets Renewed Macro Pressure

U.S. equity markets were mixed during the recent period between selection dates (May 14, 2026 – June 11, 2026, the “Period”) as the strength that carried markets to record levels in May began to give way to a more two-sided trading environment in early June. The Period opened with investors still focused on the same forces that had supported the prior month’s rally, including resilient corporate earnings, continued enthusiasm for AI-related capital spending, and evidence that large-cap technology and semiconductor leadership remained intact. That momentum persisted into the early part of June, with major indices briefly extending their advance before a sharper pullback late in the Period left broader equity benchmarks modestly lower.

The technology complex remained central to market leadership, although the composition of returns became more uneven as the Period progressed. AI infrastructure, semiconductors, memory, and data center-related equities continued to benefit from strong investor conviction around hyperscaler capital spending and the durability of demand across the broader compute ecosystem. Semiconductor equities were a notable source of strength, and the Philadelphia Semiconductor Index advanced during the Period even as broader indices declined. This divergence was consistent with the market’s continued willingness to assign premium valuations to companies viewed as direct beneficiaries of the AI investment cycle, while becoming more selective across other areas of growth and consumer-facing equities.

At the same time, the macro backdrop became less supportive. Labor market data remained firm, reinforcing the view that the U.S. economy continues to expand, but also limiting the market’s ability to price a more accommodative Federal Reserve path. Inflation concerns also moved back into focus late in the Period, with energy prices and geopolitical risk contributing to renewed pressure on rate expectations. The result was a market that continued to reward visible earnings strength and AI-linked growth, but with less tolerance for valuation risk, weaker balance sheets, or narratives that had moved ahead of fundamentals. The sharp selloff in early June highlighted that sensitivity, particularly across higher-beta growth and sentiment-driven segments of the market.

Against this backdrop, the S&P 500 declined 1.3% and the Nasdaq Composite fell 3.0% during the Period. The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) declined 2.1%, modestly underperforming the S&P 500 but outperforming the Nasdaq Composite. The result reflected a more balanced environment for the BUZZ Index than in the prior Period, when higher-beta, AI-linked constituents participated disproportionately in the rebound. While semiconductor exposure remained supportive, broader sentiment leadership was pressured by profit-taking, macro uncertainty, and a more cautious tone across several areas of the market. In our view, the Period therefore represented less of a reversal in the AI and technology leadership theme than a pause in its broader market expression, as investors continued to favor the strongest structural growth stories while becoming more disciplined around price, positioning, and macro risk.

The BUZZ Index returned 20.23% during the month of May compared to a return of 5.26% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index leads the S&P 500 with returns of 25.27% and 11.27%, respectively, as of the end of May.

Micron and AST SpaceMobile lead BUZZ Gains as AI Infrastructure and Space Connectivity Themes Remain in Focus

Micron Technology, Inc. (NASDAQ: MU) was the leading contributor to BUZZ Index performance during the Period, as its stock rose 28.3%. The stock continued to benefit from investor enthusiasm around the AI memory cycle, with high-bandwidth memory and DRAM increasingly viewed as critical bottlenecks in the broader AI infrastructure buildout. During the Period, several sell-side and industry reports reinforced the view that memory supply remains tight, with Morgan Stanley reportedly highlighting sustained DRAM and NAND constraints, limited capacity expansion, and strong hyperscaler demand as supportive of continued earnings revisions and improved free cash flow visibility. Additional commentary pointed to AI workloads extending the duration of the current memory upcycle, while investors appeared willing to look through longer-term competitive concerns from Chinese memory suppliers given Micron’s more immediate leverage to high-bandwidth memory and advanced DRAM demand.

AST SpaceMobile, Inc. (NASDAQ: ASTS) was also a significant contributor, as its stock rose 17.5% during the Period. The stock recovered from earlier launch-related and earnings-driven weakness as investors refocused on the company’s next deployment milestone and the broader direct-to-device satellite connectivity theme. On June 9, AST SpaceMobile announced that its BlueBird 8, 9, and 10 satellites were scheduled to launch on June 17 from Cape Canaveral aboard a SpaceX Falcon 9 rocket. The company also benefited from renewed investor attention toward the broader space economy ahead of the expected SpaceX public listing under the SPCX ticker, which appeared to lift interest in publicly traded space and satellite-related equities. While execution risk remains central to the ASTS investment case, particularly following the earlier BlueBird 7 setback, the upcoming launch announcements may have helped restore some confidence in the company’s 2026 deployment schedule.

Top BUZZ Index Contributors: May 14, 2026 – June 11, 2026

Source: BUZZ Holdings ULC, Bloomberg. 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.

Strategy and NVIDIA Detract as Bitcoin-Linked Exposure Weakens and Semiconductor Leadership Broadens

Strategy Inc (NASDAQ: MSTR) was the largest detractor from BUZZ Index performance during the Period, as shares of the largest corporate holder of Bitcoin slid 35.7%. The weakness was notable given that Bitcoin declined 22.2% over the same window, leaving Strategy Inc underperforming its primary underlying exposure. The underperformance appeared to reflect a market that was increasingly focused on the structure of the company’s Bitcoin treasury strategy, rather than Bitcoin price exposure alone. During the Period, investors continued to debate the implications of Strategy Inc potentially selling portions of its Bitcoin holdings to fund dividend obligations and debt repurchases, while concerns mounted relating to the compression in the company’s mNAV premium and the cash requirements associated with its preferred stock structure. The company later resumed Bitcoin purchases, including a 1,550 Bitcoin acquisition between June 1 and June 7, but that update came against a backdrop of prior concerns around a small Bitcoin sale to fund preferred dividends, ETF outflows weighing on crypto sentiment, and the potential for further dilution through equity issuance.

NVIDIA Corporation (NASDAQ: NVDA) also detracted from performance, declining 13.1% during the Period. This decline was notable because the broader semiconductor complex, as measured by the MVIS US Listed Semiconductor 25 Index, advanced 5.4% over the same timeframe, highlighting a period in which semiconductor leadership broadened away from the most crowded AI bellwether. While the company’s fundamentals remained strong, including continued investor focus on AI infrastructure demand, several factors may have weighed on the stock. The broader AI semiconductor group sold off sharply in early June after Broadcom’s AI revenue guidance disappointed elevated expectations, triggering a reset across high-multiple chip stocks. At the same time, the market appeared to reward other semiconductor exposures more directly tied to custom silicon, memory, analog, and broader infrastructure themes, which helped explain why the index rose even as its largest weight, NVDA, declined. Additional pressure came from scrutiny around NVDA’s China business and U.S. export controls, as well as a broader valuation and positioning reset after the stock had reached an all-time high at the start of the Period.

Bottom BUZZ Index Contributors: May 14, 2026 – June 11, 2026

Source: BUZZ Holdings ULC, Bloomberg. 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.

BUZZ Index June 2026 Rebalance Highlights

Marvell Technology, Inc.

Investor attention toward AI infrastructure was previously focused on the largest beneficiaries of the theme, but 2026 has seen semiconductor leadership broaden meaningfully beyond the most widely followed mega-cap names. Year-to-date through June 11, 2026, Micron Technology (NASDAQ: MU) had gained 249.1%, while Lam Research (NASDAQ: LRCX), Advanced Micro Devices (NASDAQ: AMD), and Intel (NASDAQ: INTC) had also posted substantial advances as investors continued to reward exposure to memory, advanced manufacturing, AI compute, and data centre infrastructure. Although technology stocks pulled back sharply in early June, investor interest in the broader AI ecosystem remained resilient. Valuations have continued to expand across parts of the sector, and market commentary has increasingly questioned whether the industry’s growth assumptions have become too interconnected. Still, capital has continued to flow toward companies viewed as direct or adjacent beneficiaries of AI-related capital spending. Marvell Technology (NASDAQ: MRVL), a long-standing constituent of the BUZZ Index, has been one of the more notable beneficiaries of this broadening. After several years of largely range-bound performance, Marvell has gained 230.7% year-to-date through June 11, supported by investor focus on its role in custom silicon, high-speed connectivity, optical networking, and data centre infrastructure. Sentiment toward the company increased sharply during the most recent Period, resulting in the largest weight increase in the BUZZ Index this month, with MRVL rising from a 0.51% weight to the maximum 3.0% weight.

Intuit, Inc.

This month, the BUZZ Index welcomes first-time constituent Intuit Inc. (NASDAQ: INTU). The company is best known for its suite of personal and small-business financial tools, including TurboTax, QuickBooks, Credit Karma, and Mailchimp. Once viewed as one of the more durable software franchises in the market, Intuit has experienced a significant reset over the past year, with the stock falling by nearly two-thirds after peaking above $800 per share in July 2025. The decline reflected broader pressure across software, as well as investor concern that AI-native tools could disrupt portions of the company’s tax, accounting, and small-business workflow businesses. Rather than treating AI solely as a threat, Intuit has moved to integrate its products into the emerging AI ecosystem, announcing partnerships with OpenAI and Anthropic to bring Intuit-powered experiences into ChatGPT and Claude. More recently, sentiment has begun to stabilise as investors appear to be reassessing the degree to which AI will displace established software platforms with trusted brands, proprietary datasets, and regulated workflows. This improvement in perception helped drive renewed interest in INTU, resulting in the stock entering the BUZZ Index this month with a 0.82% weight.

For more on rebalancing results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

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Key takeaways

• Bitcoin sells off as ETP outflows mount: bitcoin’s 30-day average price slipped to ~$70,321 (-10.3% m/m) while US spot ETPs shed a cumulative ~$5.0B, with 19 of the last 22 sessions in net outflow.
• Holders are capitulating, not taking profit: realized losses jumped +78% m/m to $714M as realized profit collapsed -57% to $194M, pulling the realized profit/loss ratio below 1.0 and pointing to below-normal forward returns.
• Bitcoin Miners lean on sales and AI to fund operations: May miner revenue fell -26% y/y to ~$1.12B, holding near the 37th percentile of its since-2023 range as IREN and TeraWulf expand AI and HPC capacity.

Bitcoin Sells Off in June 2026 Despite a Late-Month Bounce

Bitcoin (BTC) reversed sharply lower over the past 30 days, with spot closing June 14 at $65,705 and the 30-day moving-average price slipping to ~$70,321 ( -10.3% m/m). The selloff was front-loaded: after peaking near $82,186 on May 10, spot bottomed at $60,861 on June 6 before a modest recovery into mid-month ahead of the June 14 Iran deal. The BTC ETF complex was a key driver, with net flows turning persistently negative as 19 of the last 22 trading days were marked by outflows for a cumulative ~$5.0B exit.

Aggregate ETF balances fell to $78.8B as of June 11, down ~27% from $107.5B a month earlier and off the $109.0B peak on May 5, reflecting both sustained redemptions and the lower mark on remaining holdings. Trading volumes stayed elevated, averaging ~$1.37B per day over the period as macro uncertainty spiked early activity, before cooling to ~$1.15B per day over the last five sessions.

The weak tape pulled onchain profitability lower across several metrics. NUPL (net unrealized profit/loss) fell to 0.20 (30-day average 0.25 versus 0.33 the prior month, -24.6% m/m), roughly the 18th percentile of the last four years and below both the 1-year average of 0.40 and the 4-year average of 0.37. The latest reading pushes the BTC price into the "Hope/Fear" band. The share of supply in profit slid from 64% to 54%, far under its ~81% 4-year average and in just the 9th to 12th percentile historically. Supply held in loss is now near a 4-year high at the 95th percentile, more than two standard deviations above the mean.

Realized Losses Exceed Realized Profits by $54B in 2026

Source: Glassnode as of 6/15/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Crucially, holders are not taking profit but instead capitulating to sell their coins at a loss. Daily realized profit collapsed -57% m/m to a 30-day average of $194M (13th percentile of the past four years) versus $447M the prior period, while realized losses jumped +78% to $714M from $402M. The realized profit/loss ratio (RPLR) fell below 1.0, dropping from 1.11 in the previous 30-day period to 0.27 in the last 30 days, meaning more value is being locked in at a loss than at a gain. Stepping back, the average ratio of the past two years is 2.2x. Unrealized losses as a share of market cap nearly doubled, up +88% m/m to roughly 15% and now at the 79th percentile, confirming a broad, recent drawdown that pushed a large cohort of coins underwater.

On a 30-day-average basis, the realized profit/loss ratio (RPLR) works as a short-term regime signal. When it sits below 1, with losses outweighing gains, BTC has gone on to deliver below-normal returns over the following one to six months, and that underperformance holds up as statistically significant. Higher readings track at or above normal, though the profit-heavy extreme is no better than average, and the apparent two to three year mean-reversion is too thin on independent cycles to trust. With RPLR 30 Day MA at 0.28 on June 14th , the tape is loss-leaning and historically points to sub-par returns over the next quarter or two. Though weaker statistically, returns over the next year or more tend to be above average.

Median Forward Return By 30-Day Ma RPLR Regime

Source: Glassnode as of 6/15/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Options Market Turns Defensive as Put Premiums Climb

BTC Put Premiums Paid +46% m/m, +14% y/y; Call/Put Ratio Flipped to 0.73 (10th Percentile)

Source: Glassnode as of 6/15/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

The options complex flipped sharply defensive over the last 30 days as BTC's ~10% slide pulled hedging demand back into downside protection. Put premiums paid surged +46% m/m to $441.3M while call premiums fell -34% to $321.3M, swinging the Call/Put premium ratio from 1.61 to 0.73 (10th all-time percentile). Put premium paid now sits at the 82nd percentile which is a near mirror image of last month's call-led positioning. Open interest eased modestly but stayed structurally high, with total open interest (OI) down -3.4% m/m to $34.2B and still at the 84th percentile.

Implied volatility remains historically cheap outright, yet the buying is currently concentrated on the put side. 1-month call implied volatility (IV) barely moved at 36.6% ( 4th percentile in BTC's history) and remains pinned near multi-year lows. Meanwhile, 1-month Put IV rose +2.3 percentage points to 46.5%. The result is steepening skew: the 1-month put/call differential widened to +9.9 percentage points from +7.0 a month earlier (80th percentile).

What Onchain Data Says About Bitcoin Holder Behavior

Source: Glassnode as of 6/15/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Token transfer volumes or “token spend” cooled m/m but was still elevated compared to last year’s totals. Over the 30 days ending on June 14, 2026, spent volume eased -5.2% m/m to 22.2M BTC while holding +21.6% y/y. The pullback was sharper among older coins, with spend from BTC held longer than a year down -10.8% m/m to 1.55M BTC.

Turnover, measured as 30-day spend divided by coins held, cooled across most aged cohorts m/m and fell hardest in 2y-3y (-51%), with 7y-10y and 10y+ both lighter by roughly -6%. The lone exception was 5y-7y, which firmed +7% m/m. The y/y spend volume is elevated on the longer end and led by 10y+ (+194%), 2y-3y ( +39%), 3y-5y (+34%) and 7y-10y (+26%), even as 1y-2y (-22%) and 5y-7y (-38%) cooled.

The more interesting story is in the aging. Total holdings aged over a year sat near 12.31M BTC, or 61.4% of circulating supply, up +2.3% m/m but effectively flat y/y (-0.4%). Coins maturing into older cohorts were led by 1y-2y (+9.9% m/m, fed by a 6m-12m maturing wave that added +31% m/m) and 5y-7y (+4.9%), while 2y-3y and 3y-5y slipped -10bps and -2.3% m/m. The standout is 3y-5y, where holdings have fallen -30.7% y/y and now sit -22.7% below the cohort's 4-year moving average. What matters is the composition of that decline rather than the headline figure: over the trailing year the band took in 6.41M BTC crossing the 3-year line, lost 3.99M aging up into 5y-7y, and shed 3.31M to transfers, so of every coin that left, roughly 55% matured higher while only 45% was actually spent.

Source: Glassnode as of 6/15/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Bitcoin Miners Under Pressure as Daily Revenue Stays Depressed

Daily Miner Revenues -26% y/y

Source: Glassnode as of 6/15/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Aggregate onchain miner balances have ground lower as total BTC held in miner addresses sits near 1.78M BTC. While this figure is roughly flat y/y and m/m, it is down from about 1.83M in early 2023, leaving the current level around the 37th percentile of its since-2023 range. Going against the grain of Bitcoin miners selling BTC to fund AI buildouts, Marathon bought 1,000 BTC worth $66M on June 16, 2026 after selling 20,880 BTC in Q1 at an average price of $70.1K. Still, the data suggests that most miners are selling newly mined BTC to pay for operations amid the price slump.

May 2026 miner revenue of about $1.12B was down roughly -26% y/y (April was down about -18% y/y), and on a daily basis current revenue sits at only the 17th percentile of the last twelve months and the 37th percentile since 2023. The combination of slowly bleeding balances and revenue stuck in the lower third of its recent range underlines why miners are leaning on BTC sales and AI/HPC diversification to support cash flow.

Miners Pivot to AI: IREN and TeraWulf Expand Compute Capacity

• On May 26 IREN signed a $1.6B purchase agreement with Dell for Blackwell systems to service its $3.4B managed AI cloud contract, with commissioning targeted for early 2027 at its Childress, Texas campus and management guiding annualized run-rate revenue from roughly $3.7B to $4.4B.
• On May 26 TeraWulf added the 285-acre Muskie Data Campus in eastern Kentucky, a site it expects to support more than 1GW of AI and HPC load.

Frequently Asked Questions

Why did bitcoin sell off in the first half of June 2026?

Bitcoin’s 30-day average price slipped to roughly $70,321, down -10.3% m/m, as US spot bitcoin ETFs recorded a cumulative ~$5.0B in net outflows across 19 of the last 22 trading sessions. The pressure was concentrated in spot products rather than derivatives, which points to investors trimming exposure rather than simply hedging.

What does the realized profit/loss ratio (RPLR) tell investors?

The RPLR compares the dollar value of coins moved at a gain versus those moved at a loss over a given period. As realized losses rose and realized profit fell, the ratio dropped below 1.0, a level that has historically coincided with capitulation rather than profit-taking and has been associated with below-normal forward returns over the following one to six months.

Why are bitcoin miners selling BTC and expanding into AI?

With May 2026 miner revenue down -26% y/y to about $1.12B and daily revenue near the 37th percentile of its since-2023 range, many miners are selling newly mined BTC to cover operating costs during the price slump. Several operators, such as IREN and TeraWulf, are also repurposing power and data-center capacity for AI and high-performance computing to diversify cash flow.

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• YTD realized volatility for broad investment grade munis is roughly 4–6%, versus 13–20%+ for major equity indices.
• Muni Sharpe ratios have held up well, supported by low volatility and solid underlying credit quality.
• Tax-equivalent yields (TEY) remain comparatively attractive on both investment grade and high yield munis.

The Muni Brief is an ongoing series of commentaries from VanEck Senior Municipal Strategist James Colby, examining current topics in the municipal bond market through the lens of the muni investor.

Record Flows

Munis continue to roll. Investors have poured roughly $24 billion in net flows into U.S. muni ETFs year-to-date, and last month set an all-time record with more than $7 billion in net inflows: the highest monthly total ever. That is big news.

Muni ETFs: May 2026 Posts Record Inflows

Source: Morningstar. As of 5/31/26.

The Volatility Gap

Year-to-date realized volatility for broad investment grade munis has run roughly 4–6% annualized. Major equity benchmarks ranged from about 13% for the Dow to 20%+ for the Nasdaq-100. Short-intermediate munis have been quieter still, around 2%.

Equities and municipal bonds are different asset classes with different risk and return characteristics; this comparison is for context and is not a recommendation to substitute one for the other.

Historically, that gap has reflected the nature of muni issuers rather than short-term market conditions. State and local governments, school districts, and public utilities are not subject to the earnings surprises and sentiment-driven re-ratings that move stock prices.

30 Years of Equity vs. Municipal Realized Volatility

Source: Morningstar. As of 5/31/26.

Past performance is no guarantee of future results. Volatility shown is historical and may not persist.

The Real Scorecard: Risk-Adjusted Returns

Judged on absolute return alone, munis look modest this year. But on a risk-adjusted basis the story changes: muni Sharpe ratios have held up well, precisely because volatility has stayed low and solid credit quality keeps it that way (Source: Morningstar, May 2026). Investors who maintained municipal exposure sidestepped the drawdowns that equity-heavy positioning delivered in late March.

The Yield Tells the Other Half of the Story

Low volatility is only part of the appeal. The other part is what munis pay. Yields on both investment grade and high yield municipal bonds remain comparatively attractive, and once you account for their federal tax exemption, the gap widens further. On a tax-equivalent basis, high grade munis are out-yielding Treasuries across much of the curve, as the chart below shows. For an investor in a high bracket, that after-tax income stream is hard to replicate in taxable fixed income.

As with all bonds, municipals are subject to interest-rate risk — prices generally fall when rates rise — and to credit risk, which is greater for high yield issuers.

Muni Tax-Equivalent Yields Compared to Treasuries

Source: ICE Indices. As of 6/9/26. TEY based on 37% tax rate.

Unlike Treasuries, which are backed by the full faith and credit of the U.S. government and whose income is exempt from state tax, municipal bonds carry credit and call risk and may be subject to state and local taxes.

Final Thoughts

The case is not complicated. As long as investors remain cautious about where new money goes, municipals may continue to attract flows, and the numbers this year explain why. Investors looking for exposure can access the municipal market through VanEck’s muni ETF suite, spanning high yield and investment grade across short, intermediate, and long durations.

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RAAX is transitioning from an ETF-of-ETFs structure for its equity exposure to a portfolio of individual equity holdings. This enhancement is designed to improve implementation efficiency by reducing acquired fund fees and expenses associated with the ETF-of-ETFs structure. Investors will continue to receive the same diversified exposure to real assets and the same investment philosophy that has historically defined RAAX, while the investment team gains greater control over portfolio exposures.

Will RAAX still hold any ETFs?

Yes. RAAX will continue to hold ETFs for commodity exposure, specifically the VanEck Commodity Strategy ETF (PIT) and the VanEck Merk Gold ETF (OUNZ). These vehicles provide the most practical and efficient access to commodity markets, where direct ownership is not feasible in the same way as it is for equities.

How are the fees handled for PIT and OUNZ?

The expense ratio for PIT will be rebated to RAAX investors, so investors will not bear those costs indirectly. OUNZ holds physical gold and is not a registered investment company under the Investment Company Act of 1940, so it is not subject to acquired fund fees and expenses (AFFE) disclosure requirements. This means OUNZ’s costs are not reflected in RAAX’s stated AFFE figure; however, RAAX investors still indirectly bear OUNZ’s expenses through the fund’s investment in OUNZ. Unlike PIT, those costs are not rebated.

An investment in the VanEck Merk Gold ETF ("OUNZ", or the “Trust”) is subject to significant risk and may not be suitable for all investors. OUNZ is not an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) and therefore is not subject to the same protections as mutual funds or ETFs registered under the 1940 Act.

Is the investment strategy for RAAX changing?

No. RAAX will continue to implement its three-step investment process. This transition only impacts how the fund gains exposure, not the strategy itself.

How will individual equity holdings be selected?

Holdings are selected through a disciplined sampling process designed to capture the most consequential return drivers within each real assets category. The process samples based on both market capitalization and momentum, helping ensure that the portfolio reflects the key forces driving performance across each universe of holdings.

Does this create concentration risk?

No. The sampling methodology is designed to maintain broad diversification across securities, industries, and real asset categories. Individual position sizes are controlled through portfolio construction rules, and security-level deviations from the fully replicated portfolio are limited to no more than 1%.

Will the risk profile of RAAX change?

No. The objective of the transition is to improve implementation efficiency, not to materially alter the portfolio’s risk characteristics. The portfolio will continue to provide diversified exposure across the major real asset categories.

What investment outcome should investors expect?

Investors should expect the same diversified exposure to real assets and the same investment philosophy that has historically defined RAAX. The primary benefit of the new structure is improved implementation efficiency through the elimination of acquired fund fees and expenses associated with the prior ETF-of-ETFs approach, while continuing to capture the key return drivers across real asset equity segments and enhancing the investment team’s ability to actively manage portfolio exposures.

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Key Takeaways

• Energized power is the cleanest valuation lens for now: with disclosures varying widely and cash flows still nascent, names with leases in hand command above 10x gross energized power, while those still selling a pipeline trade at 2-6x.
• Execution, not signing, becomes the next premium: the group has delivered only ~25% of leased capacity, so valuation premiums should shift toward operators that build on time and on budget, with missed construction milestones risking structural de-ratings.
• A ~$50B near-term funding gap separates pipeline from delivery: near-term capex needs far exceed cash on hand, and long-term needs approach ~$221B, making access to equity, debt, and partnership capital a key differentiator.

This material is VanEck's research commentary, for informational and educational purposes only as of the publication date. It is not an offer of advisory services, a solicitation, investment advice, or a recommendation regarding any security or strategy. Companies are referenced only to illustrate the framework discussed. VanEck, its affiliates, and their personnel may hold or trade positions in bitcoin and the companies mentioned, and may have conflicting interests. Views may change without notice.

Few sectors have transformed as rapidly as Bitcoin mining, so it's unsurprising that these companies, now pivoting to AI, have been among the most volatile equity performers of the past year. The investment thesis is compelling, as existing power infrastructure is re-deployed to serve AI customers that are willing to pay premium rates in a capacity-constrained market. That said, the financial performance of these businesses has yet to reflect the strategic narrative, creating a valuation challenge. Investors are given the task of pricing companies based on a mix of legacy mining operations with declining relevance and nascent AI infrastructure businesses with uncertain timelines to cash flow generation, all while raising significant capital up-front to fund these endeavors. Below we attempt to help navigate this challenge, by providing a framework for how we think about valuations.

How the Market Values Bitcoin Miners Pivoting to AI/HPC

With disclosures varying widely and each company at a different stage of its AI pivot, no clear framework exists for valuing bitcoin miners through this transformation. Until more contracts are secured and cash flows begin, we believe the cleanest available benchmark is gross energized power, as it cuts through disclosure gaps and highlights the companies actually leasing capacity vs those that are still selling a pipeline. The comp sheet below highlights that companies with little to no contracted capacity trade at 2-6x energized power (MARA, CLSK), while those with leases in hand command >10x (CIFR, HUT, WULF). We also see credit given to those that have begun to deliver leases (APLD, CORZ), while significant re-rating potential remains in those that are still in the proof of concept stage (BTDR, HIVE, KEEL).

Over time we expect valuation to migrate from megawatts (MW) of energized power toward those actually leased and delivered, until cash flow generation begins and more rigorous fundamental work becomes valuable. For now, we find that the market is paying for contracted and energized capacity, while discounting everything still in the pipeline.

Our Read on Relative Value

Based on energized power today, we see HIVE and BTDR trading at the lowest multiples (given their risk and minimal contracted to date), followed by MARA and CLSK (names still tied to bitcoin (BTC)). Ultimately, we expect those focusing on an AI/HPC (high-performance computing) pivot more likely to re-rate in the near-term, but believe those currently capturing a higher multiple may have the potential to compound their cost of capital advantage into economies of scale and profitable long-term growth, given the quality of the contracted tenants and ability to execute additional deals at increasingly favorable terms (CIFR, HUT, WULF).

Comp Sheet - Capacity

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

How Valuation Frameworks Could Evolve

While we view energized power as the best valuation lens for now, we see it as a placeholder for the metrics that will matter once the group matures (Cash flow, Unit Economics, Capital Efficiency, Contract Quality). As more contracts are secured, we expect focus to move from how much capacity a company has energized to how much it actually delivers on schedule. The delivery to leased ratio will become a key metric, and timelines to cash flow generation will start to dominate the discussion as investors shift from counting megawatts to monitoring deployment velocity. Near to medium-term we expect valuations to remain anchored to contracted power and proven delivery, with the market only beginning to price expected equity value from future leases (we expect a busy 2H26 on contract announcements).

We expect valuation premiums to shift from companies with signed contracts to those that can execute delivery on time and on budget: Getting signed leases is only the first step, with the delivery execution bar to be high given that very few companies in this space have experience in building out the infrastructure required for AI. Today the group has only delivered ~25% of its leased capacity, and that figure is likely to decline further before it improves as new contracts kick off large-scale construction in 2027-2028. Companies that miss construction milestones are likely to face structural de-ratings.

REIT Transition: Discounted cash flow (DCF) approaches incorporating a cost of capital reflective of the terms and customer type of each deal will gain importance, as these companies will begin to look more like real estate investment trusts (REITs) with valuations highly sensitive to these variables. We expect the end state of many of these contracts and companies to be sale or conversion to REITs, so identifying an appropriate terminal value (or exit sale price) will be critical in determining the current value to these companies.

Monitoring Execution Risks

As market focus shifts from contract wins to delivery, we expect execution timelines to take center stage. Our estimated delivery schedule below attempts to quantify how many MWs of leased critical IT we expect each company to bring online over the next 3 years. The picture is inherently lumpy until more deals are announced, but based on the timelines communicated so far, we see a long runway ahead. We'll sharpen these estimates as additional contracts get disclosed and construction milestones land throughout the year, which can act as a key tracker of how companies are progressing as planned.

Comp Sheet - Est Delivery Schedule

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Our Deal Tracker Suggests a Busy 2H26

Based on the latest commentary for each company (primarily 1Q earnings cycle), we estimate the likelihood for the next lease announcement. While 'wen deal' is not the most fundamental way to evaluate these companies, we believe it remains an important catalyst for each as many companies are sitting on large uncontracted power supplies. We would expect volatility around future deal announcements to become less pronounced over time, reducing its catalyst potential in the medium-term.

Deal Pipeline

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Bottom-Up Approach to Understanding Valuations

Given that the vast majority of signed contracts are pre-revenue in the construction phase, we conducted a bottom-up sum-of-the-parts (SOTP) build for each company to get a sense for what the market is currently pricing in, and where valuation disconnects may be most evident. In conducting this analysis, we find significant re-rate potential for several names (HIVE, KEEL, WYFI, IREN), while acknowledging their limited history and elevated execution risk. Companies that look more appropriately valued based on their current pipeline include those that have not yet secured an AI lease (MARA/CLSK), and those who have already secured contracts and are focusing on execution (WULF/CORZ). Using this analysis as a starting point, we can better understand how investors perceive each name and gauge the upside/downside potential as the group continues to progress through signing new contracts.

Bottoms-Up SOTP

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Unpacking Our SOTP

What do we do? Our SOTP combines existing contracts, uncontracted co-location/AI cloud site capacity, mining operations and HODL (retained bitcoin) balances for each name. In doing this analysis, we incorporate every site the company has that is likely to be leased over the next several years. Future site acquisitions, or those that remain unlikely to be eligible for delivery until after 2030 are not incorporated. This keeps our methodology closer aligned to the total 'energized power' each company has today rather than its 'blue sky' pipeline.

How do we calculate? We address inconsistent deal disclosures across the sector by developing standardized estimates for each company's uncontracted capacity. For each MW of critical IT load a site is expected to have we apply a baseline net operating income (NOI) of $1.5M/MW, and adjust based on company guidance or deal expectations when available. We then apply a ~15x enterprise value (EV) multiple derived from a 10% weighted average cost of capital (WACC) and 3% terminal growth rate, adjusted based on the expected or contracted tenant risk profile. For capex, we assume $10M/MW to fully build out greenfield sites, adjusted based on company guidance or for brownfield retrofits. For further out locations, we apply a slightly higher build cost (~$12M/MW) to account for potential construction cost inflation in the coming years. For AI cloud businesses we estimate potential GPU capacity based on MWs of capacity at each site, and then calculate the annual revenues based on price per hour. In some cases, we apply a higher NOI per MW (~$10M), in line with prior deal disclosures. For existing contracts, we calculate the implied equity value based on the disclosed terms of the deal, including NOI per MW and capex per MW.

To calculate the implied equity value for uncontracted sites, we subtract the expected capex from the implied enterprise value, and then apply a probability-weighted discount that reflects the likelihood and timing of revenue generation for each potential contract. Our base case assigns 50% and 15% probabilities for near-term and longer-term sites, respectively, while bull case scenarios apply 75%/30% and bear case scenarios apply 25%/5%. For companies with BTC holdings, we incorporate estimated HODL balances at a price of $70K per BTC, and apply multiples to existing mining operations using a mix of 30x current EH/s and ~6x '27E EBITDA. We also are mindful of mining sites that would convert their power to AI, impacting the current mining operations in the following years.

The spread between our bull and bear cases is itself a key output. The companies focused on AI cloud businesses (IREN, BTDR, HIVE) carry the widest ranges, while those with a number of contracts already secured (CORZ, WULF, APLD) show less variability. There may be a sweet spot for those companies with strong anchor deals and more modest re-rate potential (CIFR, WULF, HUT), although those with zero or only one anchor deal may have significant upside potential as more contracts are secured (KEEL, IREN, BTDR, HIVE). The miner/AI hybrids generally appear more fairly valued today (MARA, CLSK, RIOT), with limited AI progress and higher BTC sensitivity. We note that companies that may not screen as having the highest re-rate potential could still outperform with strong delivery execution and by acquiring additional capacity.

Tenant Quality Drives the Cost of Capital

Tenant quality is a critical factor in valuing AI leases, as it is the primary input to the cost of capital to support 10-15+ years of cash flows. A MW leased to an investment-grade hyperscaler under a long-dated, triple-net structure supports a far lower discount rate, and a higher exit multiple, than the same MW sold to a smaller GPU cloud on a shorter duration. This is why investor focus has centered on the type of customers these companies expect at their sites, and where we believe a fundamental mismatch exists between perception and reality. On a standalone basis, these companies carry a mid-to-high teens cost of capital, close to or above the yields many of these contracts are capturing on capex, leaving little spread. A credible tenant changes that math, as the cash flow is financed against the customer's credit quality rather than the company's own, pulling the effective cost of capital down toward ~6-10%, significantly increasing the value created.

We believe this mismatch is a dynamic still underappreciated by the Street, evidenced by Bloomberg (BBG) WACC estimates ~400 basis points (bps) higher (on average) than we estimate using more appropriate cost of debt assumptions. BBG's WACC still anchors on historical equity volatility and backward-looking debt costs that reflect legacy mining businesses, not the contracted AI/HPC revenue these companies are building towards. Our cost of debt is estimated based on the actual and expected tenant base, where companies with investment-grade (IG) and hyperscaler backstops (CIFR, HUT, WULF) warrant closer to 6%, while those with shorter-duration AI cloud contracts still warrant >10%. As lease signings progress and cash flows mature, we expect market-implied discount rates to compress towards our estimates.

Recent debt raises have come at increasingly favorable terms, with hyperscaler-backstopped structures and prepayments pushing borrowing costs toward 6-7%. As more contracts are secured and these companies begin generating meaningful cash flows, we would expect their valuations to move closer to those of pure-play data center REITs (>20x EV/EBITDA), though likely remaining slightly below given the heavier ongoing capital deployment and less seasoned cash flows.

Cost of the Equity Build

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Returns on CapEx

Given the high upfront costs in delivering these deals, assessing the expected return on capex is important in comparison with the cost of funding. Unlevered EBITDA yields on capex across recent deals span a wide range, roughly 12% to 32%, and the dispersion is driven almost entirely by capex per MW rather than by lease economics, which are fairly consistent. The standouts are retrofit conversions of existing mining sites, RIOT's initial AMD leases at ~28-32%, while reusing already-built infrastructure pushes capex per MW (~$3-4M) far below the ~$10-12M typical of greenfield builds that yield closer to 12-15%.

EBITDA Yield on CapEx

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Governance Separates the Group More Than the Market Realizes

Given the nascency of the space and the varying levels of management experience across it, governance is a critical lens for assessing these companies. We implemented a governance scorecard to measure the metrics we consider most telling in evaluating management teams, namely insider ownership, management tenure, management KPIs, executive compensation, and related-party transactions. Each category is scored 1-5 and equally weighted, for a maximum total score of 25. Across the group we see a divergence between stronger and weaker governance profiles, and while the cohort has improved relative to its early mining-company roots, there remains several areas for maturity.

What we look for: Beyond management experience/tenure, we look for high insider ownership (we treat ~10% for directors and executives as a strong benchmark), clear management KPIs that tie compensation to investor interests, reasonable total executive compensation with the majority tied to performance, and minimal related-party transactions. The space has seen too many cases of outsized management compensation divorced from shareholder returns, or dealings with other companies in which management or directors hold an interest. We view these metrics as crucial to maintaining shareholder trust and creating value over the long term.

Reading the scorecard, CIFR, RIOT, CORZ and CLSK screen at the top, reflecting a combination of higher insider ownership, cleaner related-party records, and compensation more clearly tied to performance. HIVE and BTDR sit at the bottom, with HIVE dragged down by low insider ownership and BTDR by related-party concerns. We'd stress these are relative marks within a young cohort rather than absolute grades, and would flag that no companies score close to the potential perfect rating of "25", highlighting the amount that could improve across the space.

Governance Scoreboard

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Looking at BTC Exposure and Crypto Strategies

While the majority of the group is abandoning mining entirely for a pure AI/HPC pivot, a handful of names (MARA, CLSK, RIOT, HIVE, BTDR) are maintaining a hybrid approach. Our view is that the market still paints the whole group with too broad a brush, treating these names as more BTC-driven than the underlying businesses warrant.

For the group, daily-return correlation to BTC is running around 0.55 YTD, actually higher than it has been over the past several years, and the average beta to BTC sits at ~1.05, meaning the typical name still moves close to one-for-one with BTC. That said, we think part of this relationship is driven by both of these assets trading as high-beta risk assets rather than genuine mining exposure. Looking at betas across the group we see a wider split, with CLSK and MARA standing out as genuinely BTC-levered names, while CORZ, WULF, APLD and IREN all sit well below 1.0.

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

BTC Exposure Snapshot

Measured as BTC holdings against market cap, only MARA (51%), CLSK (24%), RIOT (11%), and HUT (7%) carry meaningful balance-sheet exposure, while everyone else sits around 1% or holds no treasury at all. Put simply, the whole group trades with a roughly 1.0 beta to BTC, but only a couple of names actually hold enough BTC to warrant it, and that gap represents some level of mispricing.

For the companies that do still warrant some BTC linkage, the profiles vary widely:

• MARA: Operates large mining fleet at 72.2 exahashes per second (EH/s) with a ~35k BTC treasury with full HODL strategy, and mining as primary business (strategically pivoting into AI/HPC with Starwood).
• CLSK: 50 EH/s low cost focused mining operation with AI/HPC buildout underway.
• RIOT: ~42.5 EH/s anchored at Rockdale and Corsicana sites that are being discussed for partial/full AI/HPC pivot given their size.
• HIVE: ~25.3 EH/s green-powered mining across Canada, Sweden and Paraguay, while expanding into AI cloud with existing and growing inventory of GPUs. Limiting future mining capex in favor of AI (mining cash flows as funding mechanism).
• BTDR: ~65 EH/s of self-mining but recently sold its entire HODL. Vertically integrated with SEALMINER ASICs that can be sold or used for own mining purposes. Currently growing its potential AI/HPC footprint.
• HUT: Maintains large HODL balance but mining now runs through its ~80% owned subsidiary of ABTC corporation (~28 EH/s, ~7.3k BTC), as HUT focuses on executing leases across its large power portfolio for AI/HPC.

Ongoing mining and a growing HODL treasury cut both ways. They add to stock volatility, but in a rising BTC environment they also generate free cash flow that can help fund the AI/HPC buildout. On balance, we expect the BTC link across the group to keep fading as mining becomes a smaller share of the mix, and the operators that have genuinely moved on (CORZ, WULF, APLD, IREN) should continue to de-correlate from here. The practical takeaway is that BTC remains a real swing factor for only a shrinking subset of the group, and treating the whole cohort as one BTC-beta trade increasingly misprices those that have already moved past it.

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Who Actually Moves with Bitcoin?

Going a step further, we size how much of each name's equity value is actually tied to BTC by isolating the BTC-sensitive portion of the business, using the HODL balance plus a 6.0x multiple on annual mining gross profit, and flex it across a $50K to $100K BTC range. The output is the share of market cap that moves with BTC, and how far equity value swings at the tails. We estimate each company's cost to mine one BTC based on its disclosed power and energy costs, to the extent the information is available.

The dispersion is wide and maps cleanly to fundamentals rather than to how the market tends to lump these names together. MARA screens as almost a pure BTC proxy, with BTC-sensitive value equal to ~98% of its market cap, reflecting its large treasury and mining-led model. CLSK follows at ~53%, while RIOT (23%), BTDR (18%), and HIVE/HUT (13%) carry moderate exposure.

Looking at equity sensitivity tells a similar story, with MARA’s and BTDR’s equity value most sensitive to swings in BTC price relative to CLSK/RIOT (given higher hash rates). We notice that HIVE also shows meaningful swing potential relative to their mining operations today, but is skewed given its much smaller market cap.  A drop to $50K would take ~45% off MARA's equity value and ~50% off HIVE's, versus just ~4% for HUT, while a rise to $100K delivers ~68% upside for MARA and 75% for HIVE, while only ~11% for HUT. That takeaway reinforces our broader point that BTC remains a genuine swing factor for only a handful of companies, and to a varying extent even within that bucket, and the market's tendency to price the cohort as a single BTC trade overstates the linkage for those that have already pivoted.

Equity Sensitivity to BTC Price

Sensitivity Output

% Change in Equity Value

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

A $50B Funding Gap Stands Between Pipeline and Delivery

Across the peer group, near-term capex needs substantially exceed current cash balances, creating a combined funding gap of ~$50B. This snapshot illustrates the capital intensity of the AI buildout and helps gauge how much each company will need to raise. HIVE's gap is driven primarily by its AI Gigafactory ambitions (>100K GPUs), IREN's reflects its AI cloud GPU deployment at Sweetwater, and RIOT's reflects two large site developments at Corsicana and Rockdale.

We estimate near- and long-term capex for each company using our sum-of-the-parts (SOTP) build. The near-term figure captures funding for each site slated to begin construction over the next ~12-18 months, while the long-term estimate includes all sites currently on the radar over the next several years. We measure the funding gap without contributions of operating and BTC-driven cash generation, so for the mining names in particular, the true cliff may be somewhat softer than the headline suggests.

The dispersion is wide and HIVE screens as the starkest case, with a near-term funding need multiples above its current market cap today, driven by the Gigafactory ramp. IREN and KEEL carry the next-heaviest near-term loads, while WULF and CIFR screen as the best-funded already relative to their needs. This is consistent with the re-rate potential cutting both ways, as the same growth ambitions that drive the upside also drive the funding risk.

The funding route matters as much as the size of the gap, and it ties to our BTC framework. The treasury names (MARA, CLSK, RIOT, HIVE, BTDR, HUT) can lean on BTC monetization, whether credit lines against HODL balances or selective sales, to part-fund the buildout. IREN in particular pairs a 109% near-term gap with no treasury to monetize, leaving dilutive equity or incremental debt as the primary options. MARA's funding needs are also structurally lower, as its existing sites count as equity contributions into the Starwood JV, reducing the upfront capex required before additional capital commitments begin. This, along with the company's BTC holdings, creates a much stronger funding profile than other pure-pivot miners that have already sold their BTC balances.

Finally, the near-term gap is only part of the story. Long-term capex needs across the group total ~$221B, nearly 4x the near-term figure, underscoring just how capital-intensive the full buildout becomes if these pipelines convert. We stop short of framing a "LT funding gap" given the wide range of outcomes on timing and deal flow, but the figure frames the scale of equity, debt, and partnership capital the sector will need to absorb over the next several years.

Balance Sheet Snapshot ($M)

Source: VanEck Research, Bloomberg as of 6/4/2026. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Frequently Asked Questions

Why are bitcoin miners pivoting to AI infrastructure?

Miners hold large, energized power capacity that can be re-deployed to serve artificial intelligence and high-performance computing (HPC) customers paying premium rates in a capacity-constrained market. The economics can be compelling: unlevered EBITDA yields on recent deals span roughly 12% to 32%, with retrofit conversions of existing mining sites at the high end because reused infrastructure pushes capex per megawatt far below greenfield builds.

How do investors value bitcoin miners transitioning to AI?

With financial results still lagging the strategic narrative, the cleanest current benchmark is gross energized power, which cuts through inconsistent disclosures. Names with leases in hand trade above 10x energized power, while those with little contracted capacity trade at 2-6x. Over time, metrics such as delivery-to-leased ratios, unit economics, and timelines to cash flow should take over.

What determines the cost of capital for an AI data center lease?

Tenant quality is the primary driver. A megawatt leased to an investment-grade hyperscaler on a long-dated, triple-net structure supports a far lower discount rate than the same megawatt sold to a smaller GPU cloud on a shorter term, pulling the effective cost of capital from the mid-to-high teens toward ~6-10%.

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1. Publicly traded BDCs aren't the private credit story making headlines — daily pricing, no lockups, and no gating mechanisms set them apart structurally.
2. Credit quality is holding: the nonaccrual rate stands at just 1.4% as of Q4 2025, well below the 5%+ seen at the height of COVID.
3. Large-cap BDCs are yielding 12.6% on average which is roughly double leveraged loans and triple the 10-year US Treasury.

The Large-cap BDC Dividend Yield is derived from a basket of BDCs from S&P Capital IQ and SEC filing as of May 3, 2026. 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.

The Headlines vs. The Data

Private credit has had a noisy year. Redemption requests at non-traded funds, questions about whether private NAV marks reflect current market conditions, and high-profile transaction failures have generated a steady stream of negative coverage.

But there is an important distinction that is getting lost in the coverage: the publicly traded BDC market is a different vehicle. Shares price daily. Holdings are disclosed quarterly and there are no lock-up periods or gating mechanisms. The stress in private credit has largely been a story about illiquid structures meeting investor demand for liquidity. That is not the publicly traded BDC story.

Credit Quality: What the Numbers Actually Show

According to the Houlihan Lokey BDC Monitor Spring 2026, which tracks more than 170 BDC funds, the nonaccrual rate across publicly traded BDCs was 1.4% as of Q4 2025. To put that in context, during the height of COVID in 2020, that number exceeded 5%. The current level is not the profile of an asset class in distress.

Exhibit 1: Nonaccrual Rate Over Time (2019 to Q4 2025)

Nonaccrual Investments as a Percentage of Total Portfolio⁽²⁾

Source: Advantage Data, as of 31 December 2025.⁽²⁾ Reflects the cost of nonaccrual investments as a percentage of total portfolio cost for BDCs tracked by Advantage Data.

The underlying loan portfolios support that picture. As of Q4 2025, 87.6% of loans in publicly traded BDC portfolios were priced above 97 cents on the dollar, and first lien senior secured loans represent the dominant share of holdings. These are not equity positions in speculative companies. They are senior loans to middle-market businesses, with real collateral behind them.

None of this means the asset class is without risk. Nonaccruals ticked up 28 basis points in Q4, and implied recovery rates on nonaccrual loans declined during the quarter. The picture is stable, not perfect. But stable, when the headlines suggest otherwise, is worth noting.

The Income Case

Even with the macro noise, publicly traded BDCs continue to deliver some of the most attractive income available in the market. The average dividend yield across large-cap publicly traded BDCs is 12.6% as of Q4 2025. For context, that is roughly double the yield on leveraged loans, nearly double high yield bonds, and approximately three times the yield on the 10-year US Treasury.

That income is built on floating-rate, senior secured loans to middle-market companies — borrowers who pay a credit spread above SOFR that has historically been durable across rate cycles. NII margins have compressed from their 2023 peak, and new first lien loans are pricing at tighter spreads than two years ago. That is worth watching. But the credit spread component above base rates has persisted, and the income from publicly traded BDCs has remained in an attractive range even as the rate environment has shifted.

Why Diversification Matters More Than Ever

Not all publicly traded BDCs are created equal. A look at the large-cap peer group as of Q4 2025 illustrates the point: price-to-NAV ratios range from 0.45x at the low end to 1.60x at the high end within the same universe. The spread reflects real differences in credit quality, manager track record, portfolio composition, and borrower sector exposure.

That dispersion is a reason to be thoughtful about how you access this asset class. In an environment where headlines are driving sentiment broadly, the fundamentals underneath individual names matter more, not less.

BIZD: Diversified Access to Publicly Traded BDCs

The VanEck BDC Income ETF (BIZD) tracks the MVIS US Business Development Companies Index, providing diversified exposure across the publicly traded BDC market in a single, liquid vehicle. Rather than concentrating in one manager or one borrower pool, BIZD spreads exposure across the industry's largest and most established names, capturing the income potential of the asset class while reducing single-issuer risk.

For investors who believe that the recent sentiment overshoot in private credit has created an opportunity in publicly traded BDCs — where credit quality is holding, income remains attractive, and the structural concerns driving headlines elsewhere do not apply — BIZD offers a straightforward way to express that view.

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• The strategy's energy weight rose 7%+ on net as surging oil prices drove analyst upgrades across BP, Shell, ENI, and Equinor.
• Strong Q1 earnings drove analyst upgrades across European financials, adding HSBC, Deutsche Boerse, and Commerzbank.
• Japan was reduced as oil import costs squeezed margins and analysts cut estimates across consumer and industrial stocks.

VEFA's First Rebalance: What Analyst Sentiment Is Saying About EAFE

The VanEck MSCI EAFE Analyst Sentiment ETF (VEFA) completed its first quarterly rebalance on June 1. For investors new to the strategy, VEFA tracks the MSCI EAFE Analyst Sentiment Select Index, which systematically tilts toward stocks where professional sell-side analysts are most actively raising their expectations across earnings estimates, price targets, sales forecasts, cash flow projections, and ratings changes. The fund is designed as an enhanced core international allocation, seeking to stay below 4% tracking error compared against the MSCI EAFE Index. A full introduction to the VEFA strategy is available here.

The US-Israel war against Iran was the defining event of the past three months. The conflict sent oil prices surging and triggered a broad wave of analyst revision activity across developed markets, reshaping conviction on both sides of the ledger. The rebalance captures that shift simultaneously and without discretion, which is precisely what the strategy is designed to do.

What Changed in VEFA's First Rebalance?

The energy upgrade was the dominant theme of the quarter and the most direct expression of the Iran war's impact on analyst consensus. BP and Shell in the UK, ENI in Italy, and Equinor in Norway all saw widespread earnings and price target upgrades as oil revenues climbed sharply. As large diversified producers, the net benefit of elevated crude prices to their revenues far outweighed any operational disruption from the conflict, driving broad analyst upgrades across the group. The result was one of the largest single-sector net additions in the portfolio, with energy rising over 7% on a net basis.

Financials told a complementary story. European banks and stock exchanges saw broad improvement in analyst sentiment on the back of strong first-quarter earnings, with the majority of European banks beating consensus estimates driven by robust net interest income and fees. HSBC, Deutsche Boerse, London Stock Exchange, Commerzbank, and Swedbank all entered the index, reflecting an upgrade cycle concentrated in names with direct linkage to improving financial conditions across the continent.

On the other side of the ledger, Japan saw the most thematically coherent reduction. Japan sources approximately 95% of its oil from the Middle East, making it one of the most acutely exposed developed economies to the conflict. Rising input costs squeezed margins for manufacturers and dampened consumer spending power, prompting analysts to cut estimates across consumer and industrial names. Bridgestone, Suzuki, Ajinomoto, and several Japanese construction and industrial companies were all removed as their sentiment signal deteriorated.

Australia's reduction, while the largest by net weight, reflects a different set of pressures entirely. Softening Chinese steel demand weighed on Fortescue independently of the oil price move. ANZ faced a more specific set of headwinds, with the bank losing mortgage market share in both Australia and New Zealand and facing analyst downgrades on revenue concerns. Goodman Group was caught in a period of domestic real estate volatility. These are three distinct stories rather than a single macro driver, and the signal captured each of them on its own terms.

Source: VanEck and MSCI. Data reflects the June 1 rebalance. Holdings and allocations are subject to change and are not recommendations to buy or sell any security.

Which Stocks Were Added to VEFA

BP (United Kingdom, Energy, +2.46%) BP is the largest single addition by weight this rebalance. With Brent crude surging from $72 to nearly $120 per barrel following the outbreak of hostilities in the Middle East, analysts revised earnings estimates and price targets sharply higher for integrated oil majors. BP's first-quarter profits more than doubled year on year, driven by exceptional oil trading performance and higher upstream output, prompting multiple analyst upgrades during the quarter.

HSBC Holdings (United Kingdom, Financials, +2.14%) HSBC entered the portfolio as part of the broader upgrade cycle in European and global financials. The bank delivered revenue ahead of expectations in the first quarter, with each of its four business segments growing revenues and generating returns on tangible equity above 17%. As one of the largest financial weights in the MSCI EAFE universe, HSBC's addition reflects the strategy tilting toward where conviction is building most broadly across the analyst community.

ENI (Italy, Energy, +1.85%) ENI rounds out the top three additions and reinforces the energy theme. While first-quarter results were mixed, ENI raised its full-year cash flow guidance by 20% and nearly doubled its share buyback program in response to elevated crude prices, prompting analysts to upgrade the stock on the strength of its forward earnings and cash flow outlook. ENI's addition alongside BP and Shell underscores that the energy upgrade cycle this quarter was a pan-European phenomenon, not a single-name call.

Which Stocks Were Removed from VEFA

Investor AB (Sweden, Financials, -1.44%) Investor AB is the largest deletion by weight. As a diversified holding company with broad exposure to Nordic and European equities, Investor AB's aggregate sentiment signal declined as analyst revision activity across its underlying portfolio turned less favorable relative to other EAFE constituents. In a quarter where the strongest upgrades were concentrated in names with direct commodity and financial linkage, diversified holding structures were at a natural disadvantage in the sentiment ranking.

DNB Bank (Norway, Financials, -1.27%) DNB's removal alongside the addition of Equinor illustrates an important nuance in how the signal works at the country level. Norway as a whole is nearly flat on a net basis this rebalance, but within Norway, analyst conviction shifted from the country's largest bank toward its state-controlled energy producer. Equinor was among the stronger additions this rebalance, with analysts revising earnings and cash flow estimates higher as North Sea production economics improved sharply on the back of elevated crude prices. DNB, by contrast, faced a less favorable revision environment as analyst attention in the Norwegian market concentrated around the direct beneficiaries of the oil price surge.

Bridgestone Corp (Japan, Consumer Discretionary, -1.10%) Bridgestone is the clearest single-name expression of the Japan import cost thesis. As a tire manufacturer heavily dependent on oil-derived raw materials, Bridgestone flagged that the impact of rising crude prices on production costs was expected to become apparent from the second quarter onward. Analysts revised forward earnings estimates lower in anticipation of that margin pressure, with yen weakness adding a further headwind to the company's import-heavy cost structure.

How Will VEFA Respond to Future Geopolitical Shifts?

This rebalance illustrates how analyst sentiment works in practice. The strategy does not make top-down macro calls or predict where oil prices are headed. It listens to where professional analysts are collectively revising their views and tilts the portfolio accordingly. When a shock as significant as the Iran war moves through the market, the signal captures the resulting revision activity systematically and without discretion. As the geopolitical situation evolves and analyst consensus continues to shift, VEFA will reflect those changes at each quarterly rebalance, keeping the portfolio aligned with where forward-looking conviction is building across the EAFE universe.

Index Rebalance Appendix

Additions

Deletions

Source: VanEck and MSCI. Data reflects the June 1 rebalance. Holdings and allocations are subject to change and are not recommendations to buy or sell any security.

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• More value creation is occurring while companies remain private.
• Venture-backed companies are reaching larger scale before IPO.
• Unicorn valuations continue climbing as private capital expands.
• M&A remains the dominant VC exit pathway, limiting public market access to innovation.
• Advisors may increasingly evaluate how portfolios access long-term innovation exposure.

For decades, public equity markets provided investors with relatively early access to many of the world’s fastest-growing companies. Today, the relationship between innovation and public markets is changing.

As companies remain private longer, they are increasingly reaching larger operating scale, attracting greater amounts of private capital and generating meaningful portions of their value appreciation before ever pursuing a public listing.

This evolution may have important implications for how investors think about innovation exposure and portfolio construction.

Companies Are Reaching Greater Scale Before IPO

As illustrated in the chart below, the revenue scale and profitability figures have changed dramatically over the past several decades for VC-backed technology IPOs. The revenue scale has surged when comparing a median figure of $55 million back in the 1980s to $180 million more recently. In parallel, we have seen profitability figures contract significantly over this period as innovation-driven companies continue investing more heavily into growth and disruption with less focus on profitability.

VC-Backed Tech IPOs: Revenue Traction & Profitability by Decade

Source: Jay R. Ritter, Director – The IPO Initiative; University of Florida. March 17, 2026.

Rather than accessing public markets earlier in their lifecycle, many companies now remain private while continuing to expand revenue, market share and operating scale. This trend has accelerated alongside the rise of AI and other capital-intensive technologies, where companies often require substantial private funding to support infrastructure, compute capacity and long-term growth initiatives before reaching public markets.

The following chart shows a surge in private companies valued over $1B, or “unicorns”, which is driven by a combination of larger operating metrics and increased valuation multiples as demand for private innovation continues to climb, particularly in AI-related sectors. Just looking at the current number of active unicorns, this cohort represents more than $6T in aggregate market capitalization.

U.S. Unicorn Count and Aggregate Post-Money Valuation ($B)

Source: Q1 2026 Pitchbook-NVCA Venture Monitor.

More Value Creation Is Happening Outside Public Markets

We continue seeing larger exits through M&A and IPOs as these technology companies scale, which implies that more value appreciation is happening while companies are private. However, fewer companies are pursuing exits as the staying private for longer trend continues playing out while macro factors further complicate exit activity, leading to private company market capitalizations in the hundreds of billions, and now even trillions.  This means more alpha is being generated outside public markets than ever before, which increases the importance and demand for financial advisors and investors to expand their portfolio construction in search of private market access points. 

Share of U.S. VC Exit Activity (IPO and M&A) Count by Deal Size ($M)

Source: Q1 2026 Pitchbook-NVCA Venture Monitor.

Importantly, M&A historically represents the vast majority of exits for VC-backed companies, thereby further limiting the amount of innovation-oriented companies available for public investors. 

Share of U.S. VC Exit Count by Type

Source: Q1 2026 Pitchbook-NVCA Venture Monitor.

Implications for Investors on Accessing Innovation

Public markets continue serving essential roles in liquidity, governance and scalability, but they may no longer capture the entire innovation economy. As private markets continue expanding and institutionalizing, investors and financial advisors may increasingly evaluate how portfolios access long-term innovation opportunities across both public and private market ecosystems.

The question is no longer whether meaningful innovation is occurring outside public markets. Increasingly, the question is how investors thoughtfully navigate a capital markets environment where a growing share of innovation-driven growth may remain private for longer periods of time.

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• EM bonds kept outperforming despite, or because of, geopolitical risk: low government debt and commodity exports continue to favor EM bonds over DM alternatives.
• EM is not a monolith. The team actively avoids vulnerable importers like Thailand, Philippines, and India while concentrating in commodity exporters where the macro tailwinds are strongest.
• EM markets are showing meaningful political idiosyncrasy, with market-friendly outcomes in Colombia, Hungary, Argentina, Ecuador, and Chile insulating portfolios from broader geopolitical noise and creating opportunities for active selection.

Performance Update

The VanEck Emerging Markets Bond ETF (EMBX) was up 0.77% in May, compared to 0.92% for its benchmark, the 50% J.P. Morgan Government Bond Index - Emerging Markets Global Diversified (GBI-EM) and 50% J.P. Morgan Emerging Markets Bond Index (EMBI) and up 0.20% for the Global Agg and essentially flat at -0.01% for US Treasuries. Year to date, EMBX is up 3.47%, compared to up 1.96% for its benchmark, and up 0.16% for the Global Agg and -0.33% for US Treasuries. Indonesia local (not owning it), Chile local (overweight), and Peru (overweight) contributed to outperformance. Colombia (overweight) was a loser in May, due to adverse polling that was subsequently reversed in early June (Colombia remains a big outperformer for EMBX YTD). Local currency exposure is stable at 44%, Carry is 6.49%, YTW is 7.01% and duration is 5.65.

Average Annual Total Returns* (%)

Average Annual Total Returns* (%)

^*Returns less than one year are not annualized.

The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.

Prior to 10/06/2025, the Fund operated as the VanEck Emerging Markets Bond mutual fund; performance shown before that date is that fund’s NAV performance (Class I, unadjusted for today’s ETF expenses).

EMBX Gross Expense Ratio – 0.76%

EM Bonds Remain Winners Despite Geopolitical Risk

EM bonds remain winners despite, or because of, great ongoing geopolitical risk. Emerging markets (EM) have many commodities exporters, as well as goods exporters, developed markets (DM) have mostly importers. This is a very enduring trend, one we first outlined over 13 years ago. Namely, EMs are on the winning side of what DMs are on the losing side of. EMs generally have low levels of government debt, and are also generally commodities or goods exporters, many of which have greater importance and levels as they replace Russia as a key commodities supplier. We’ve written about many examples of this, for example the positive terms-of-trade shocks this is generating for both Asian importers like India (though not enough for us to favor Indian local markets) as well as simple commodities exporters like those in Latin America and sub-Saharan Africa. DM is generally specializing in twin deficits and political division, it seems. We won’t add tons of details to this section, as we’ve written white papers on the actual outperformance of EM bonds over DM bonds, on risk-adjusted bases, and numerous pieces on “fiscal dominance”. This month, just look again at how our EM bond benchmark keeps outperforming DM’s Global Agg and US Treasuries, and hopefully also look again at how EMBX outperformed its benchmark. This is not a new story, it is just an un-appreciated one. Perhaps the best example of this remains the performance of future-reserve-currency China’s CGB performance versus US Treasury performance this year, which we produce in the exhibit below.

Exhibit 1 – China’s Treasuries Outperform US Treasuries

USTs vs CGBs during Iran War

Source: JP Morgan, Bloomberg. Data as of May 2026. U.S. Treasuries are represented by the FTSE 10-Year US Treasuries Index. CGBs are represented by the J.P. Morgan GBI-EM China Dollar Unhedged Index. Past performance is no guarantee of future results. Index performance is not representative of strategy performance. It is not possible to invest directly in an index.

Political Idiosyncrasy in EM

EMs exhibited great idiosyncrasy in a market that is very highly correlated. Hungary, Colombia, and Peru, for example, saw market-friendly political outcomes that insulated their markets from being simple functions of Iran headlines. We showed Hungary’s performance following its election in our last monthly (and we closed our overweight in Hungary following this outperformance). So, we’ll show the next election-dominated story, Colombia. To tell our little story about it, Colombia local was a portfolio stalwart for much of the year. This is based on the positive terms-of-trade shock due to higher oil prices, as well as the odds of a market-friendly outcome in presidential elections (the second round of which is next month). Now, in May, all the market received was adverse polling showing strength for the market-unfavorable candidate into the first round of elections, though this was due to local laws that had the effect of discounting conservative pollsters. The law was suspended in early June, market-supportive polls started coming out, and the first-round election happened showing the market-favored candidate, de la Espriella, winning. The market for some reason treated this result as a great surprise, which is the only surprise to us. Colombia remains a top YTD outperformer, but not in May. Just the usual drama right before an election that is likely to add to the market-friendly moves we’ve seen already in Argentina, Hungary, Ecuador, Chile, and potentially in Peru (more on that in our next monthly, hopefully!)

Exhibit 2 – Colombia’s Market-Friendly Candidate Surges

Colombia Elections - Polymarket Odds

Source: Bloomberg. Data as of May 2026. For illustrative purposes only. References to specific political outcomes and securities are not recommendations to buy or sell any security. Past performance is not a guarantee of future results.

Stagflation Risks in DM and an EM to Avoid

DMs remain under stagflationary risks, but the US is arguably a winner among DMs, so don’t be surprised by USD strength against the major currencies, as we argued in our IMF takeaways from April. The US is possibly enjoying a positive terms-of-trade shock along with many EMs. Growth certainly seems robust, as does the job market, so much so that the market is almost pricing in a full 25 basis point policy rate hike…and stocks remain near highs! In the garden of central banking, though, the ECB will discover every single rake to step on, and this is coming in June. With France in technical recession and great economic and other uncertainty, they (and the UK) will be hiking rates. Watch their currency to see the market verdict…these could be recession-triggering hikes, unlike those in the US. A key hinge. We’ve published so much on “fiscal dominance” and how DMs suffer (and the large DM current account deficits are predicted and a good economic proxy for “dissaving”), we’ll instead show a chart on an EM we don’t like – Thailand. Not all EMs are in great shape and as we argued in our IMF piece, Thailand, Philippines, India are vulnerable south Asian importers; don’t hate EM, just avoid some. Thailand’s current account surplus flipped to serious deficit as depicted in the chart below. Our response was to simply be underweight because EM remains rich in winners whereas DM has mostly stagflationary losers.

Exhibit 3 – Big Hit to Thai Current Account

Thailand BOP Current Account Balance

Source: Bloomberg. Data as of May 2026. For illustrative purposes only. Past performance is no guarantee of future results.

Exposure Types and Significant Changes

The changes to our top positions are summarized below. Our largest positions in May were South Africa, Malaysia, Mexico, Brazil and Chile:

• We increased our local currency exposure in Mexico and Peru. The Mexican central bank ended its easing cycle, putting to rest the fear that it will fall behind the curve, undermining the peso and local duration. In terms of our investment process, this strengthened the policy test score for the country. The presidential runoff polls in Peru remain tight, but local duration cheapened during the Iran war, and local bonds can be expected to benefit from the Middle East normalization and lower oil prices, which improved the technical test score for the country.
• We also increased our local currency exposure in Poland and Thailand. Poland’s central bank is not in a hurry to cut rates, despite a downside inflation surprise in May, but lower oil prices is a boon for the economy. In terms of our investment process, this translates into stronger policy and technical test scores for the country. Thailand should be expected to be among key beneficiaries from the Middle East ceasefire and lower oil prices, which improve its technical test score.
• Finally, we increased our local currency and hard currency sovereign exposure in South Africa. The central bank’s decision to go for the pre-emptive 25bps rate hike added support for local duration, while sovereign bonds should benefit from better terms of trade under the Middle East ceasefire scenario. In terms of our investment process, this strengthened both the policy and technical test scores for the country.
• We reduced our local currency exposure in Colombia and the Philippines. We took precautionary steps (along with some profits) in Colombia in the run up to the 1st round of the presidential elections, as political noise went up and the policy test score for the country deteriorated at that point. In the Philippines, a sharp increase in inflation raised concerns that the central bank might need to raise the policy rate in order to offset the impact of the Middle East-related energy crisis, which worsened the Philippine technical test score.
• We also reduced our hard currency sovereign exposure in Bolivia and local currency exposure in Hungary. We took profits in Bolivia following the post-election rally and against the backdrop of stronger domestic political noise and confusion about the size of the IMF package. These factors worsened the technical and policy test scores for Bolivia. We also decided to take election-related profits in Hungary as positioning became stretched – weakening the technical test score - and the next strong catalyst has not yet materialized.
• Finally, we reduced our local currency and hard currency sovereign exposure in Brazil, as the election landscape became more complicated following corruption allegations against the key opposition candidate, while the easing room for the central bank became smaller on the back of weakening fiscal discipline and unmoored inflation expectations. These developments worsened Brazil’s policy test score.

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• Physical AI moves robots beyond pre-programmed tasks into real-time, on-the-fly decision making.
• Companies like FANUC, Rockwell Automation, ABB, and NVIDIA are already deploying it at scale across industries.
• The shift is happening now, from warehouse floors to hospital wards, and it represents a meaningful evolution in how the global economy runs.
• For most of its history, a robot’s job description was pretty simple: do this thing, in this order, every time. No improvising. No adapting. Definitely no thinking. That’s changing fast.

Physical AI is the idea that robots don’t just execute instructions anymore. They perceive their environment, process what they’re seeing in real time, and make decisions on the fly. At NVIDIA’s 2026 GTC Conference, CEO Jensen Huang put it plainly: every industrial company will become a robotics company. That’s not a prediction. It’s a description of what’s already underway.

On the Warehouse Floor: Robots That Read the Room

Warehouse automation has been around for a while. But the older version of it was rigid. A robot knew its route, knew its task, and couldn’t do much if something unexpected showed up. That’s the automation of the past.

At MODEX 2026 in April, FANUC America demonstrated what the next generation looks like. Their CRX-30iA mobile manipulator works alongside the OTTO 600 autonomous mobile robot from Rockwell Automation in a fully integrated system built for warehouse and distribution environments. What makes it different from traditional automation: AI-driven perception. The system uses payload estimation, box-locating vision, and barcode-based decision logic to automatically adapt to varied box sizes, pallet conditions, and routing requirements without being told what to do in advance.

Sources: CRX-30iA by Fanuc. OTTO by Rockwell Automation.

Think about what that means in practice. A pallet of mixed-size boxes shows up. The robot scans, assesses, figures out what it’s dealing with, and adjusts. No human required. That’s the Physical AI difference.

And it’s not just FANUC and Rockwell. Across the broader robotics landscape, the pattern is the same: AI perception layers being added to hardware that used to run on fixed logic. The warehouse is becoming one of the most interesting testing grounds for what Physical AI can do at scale.

In the Hospital: Less Legwork, More Care

Hospitals are facing a serious nursing shortage, and a big part of the problem isn’t clinical work. It’s the physical grind of logistics: delivering supplies, transporting specimens, restocking rooms. Important tasks, but not exactly why someone went to nursing school.

ABB has been working directly on this problem. The company deployed its collaborative YuMi robot at Karolinska University Hospital in Sweden to automate manual lab tasks, reducing physical strain on staff and improving the overall working environment for clinical teams. It’s a practical, unglamorous application of robotics that quietly makes a real difference. Other players in the space, like Diligent Healthcare with its Moxi robot, are tackling similar challenges in U.S. hospitals, navigating hallways autonomously and handling supply runs so nursing staff don’t have to.

Sources: YuMi by ABB. Moxi by Diligent Healthcare.

What makes this category of robot possible at this level is the AI infrastructure underneath. NVIDIA’s Isaac for Healthcare platform provides the real-time sensor processing, simulation, and training capabilities that allow robots to operate safely and intelligently in complex, unpredictable environments like a hospital ward. It’s the kind of foundational plumbing that tends to get overlooked until you realize nothing works without it.

The common thread across both industries: Physical AI isn’t replacing human judgment. It’s taking over the tasks that never required human judgment in the first place.

What This Means for Investors

Physical AI isn’t a concept waiting on a breakthrough. The infrastructure is being built, the deployments are live, and the companies leading the charge are already operating at scale. FANUC has over one million robots installed globally. Rockwell Automation’s AMR systems are running in warehouses right now. ABB’s collaborative robotics are deployed across healthcare and industrial settings in more than 100 countries. NVIDIA’s Isaac platform is the AI backbone powering a growing number of these deployments across industries.

For investors looking for exposure to this shift, the VanEck Robotics ETF (IBOT) provides targeted access to the companies at the center of it: industrial robotics leaders, AI hardware providers, and the automation platforms connecting them. As Physical AI moves from demo floor to factory floor to hospital corridor, the companies driving that transition are where the opportunity sits.

Key Takeaways:

• NODE outperformed: NODE returned +16.5% in May, with shares climbing from $40.40 to $47.07. NODE topped the S&P 500 (+5.1%), the Nasdaq 100 (+10.5%), Bitcoin (-3.8%), and Ethereum (-11.0%); only the MVDAPP crypto-equity index (+21.5%) finished ahead.
• Mining and AI compute drove the month: HUT (+64%), CIFR (+38%), IREN (+37%), APLD (+39%), and RIOT (+57%) led the book, with the top 5 positions adding 894 bps. Spot crypto fell while mining and infrastructure equities rallied, the decoupling the strategy is built for.
• Risk ran high but downside stayed contained: NODE returned +16.5% on 43.8% annualized volatility, with an intra-month drawdown of roughly 8.3%. The book broadened to 68 holdings, adding power, grid, and AI compute names while keeping the high-beta miners.

Click here for NODE Standardized Performance.

Past performance is no guarantee of future results. Investment return and principal value will fluctuate; shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher. Call 800.826.2333 or visit vaneck.com for month-end performance.

This commentary reflects the views of the portfolio management team as of May 29, 2026, and should not be construed as investment advice or a recommendation to buy or sell any security. Past performance does not guarantee future results; the Fund’s YTD return was -6.51% (NAV) through May 2026, and investors should consider this alongside any monthly figures presented herein.

Monthly Review

NODE rose 16.5% in May, with shares climbing from $40.40 to $47.07. Spot crypto fell over the course of the month while the mining and infrastructure sectors were highly bid. Mining and chip manufacturer drove the majority of the gains. NODE beat the S&P 500, the Nasdaq 100, Bitcoin, and Ethereum by wide margins, with only the MVDAPP digital asset index ahead of us. While NODE beat the SP500, BTC and the Nasdaq 100, NODE’s performance was surpassed by that of the MVDAPP digital asset index.

Source: Bloomberg. As of 5/29/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Biggest Winners and Losers

Bitcoin miners constituted 8 of the top 9 returning equities for NODE in May and also constituted the entirety of our top 5 performing positions. Collectively, our 5 best positions added 894 basis points to our May performance figures. Across the board, miners had a strong month due to a receptive a project finance market and long-term, landmark deal announcements to lease AI datacenter capacity.

• Miners led the gains. HUT (+64%), RIOT (+57%), APLD (+39%), CIFR (+38%), and IREN (+37%) re-rated as the spot-crypto and mining-equity decoupling, the setup the strategy is built for, played out. CORZ, WULF, and CLSK extended the move.
• AI memory contributed. SK Hynix (+63%) added 111 bps on AI memory demand, the sleeve added to the book this month.
• Spot crypto was the main drag. Bitcoin (-6%) and Ethereum (-11%) weakness flowed through the crypto-beta holdings, with the Bitcoin and Ethereum ETP positions costing 25 and 11 bps.
• Single-name losers stayed small. FUTU (-31%), NRG (-14%), and SEI (-9%) were the other detractors; the five worst combined for just 98 bps of drag, a small net loss on an otherwise strong month.

Source: Bloomberg. As of 5/29/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Other assets held by the fund may have performed differently during the period.

Source: Bloomberg. As of 5/29/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Other assets held by the fund may have performed differently during the period.

Portfolio Changes

In May we expanded our number of holdings to 68 while also adding to power and AI infrastructure positions to lean into the opportunity set. In energy, we added to existing positions in DTM and NRG. We also pulled in additional AI compute exposure through a new position in Cerebras (CBRS) and the purchase of more NVDA shares. Meanwhile, we passively dialed back our crypto exposure due to token underperformance and non-crypto positions surging in value. We initiated or added to fintech positions in Nubank (NU), Bullish (BLSH), Bitdeer (BTDR), and Figure (FIGR). On the sell side we reduced our Coinbase exposure in early May while fully exiting Metaplanet (3350 JP) and MercadoLibre in mid-May. Likewise, after an epic price run, we trimmed SK Hynix late in the month.

May Risk and Return Summary

NODE put up 16.5% on 43.8% annualized vol, with a 9.2% intra-month peak-to-trough. Daily Sharpe came in at 1.31 and Sortino at 2.21. Both are strong in absolute terms, though the fund's high volatility leaves it behind the calmer S&P 500 (1.68 Sharpe) on a pure risk-adjusted basis.

NODE’s price moved with the MVDAPP digital asset index at 0.98 correlation and held a more moderate 0.70 correlation to the S&P 500 and 0.66 to the Nasdaq 100. Pass-through from spot crypto was meaningful but partial, at 0.69 correlation to Bitcoin and 0.70 to Ethereum.

Source: Bloomberg. As of 5/29/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Source: Bloomberg. Daily returns, May 1–29, 2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.

Outlook

We stay constructive on AI infrastructure and tokenization while staying cautious on pure-play crypto entities. May was the month the thesis, that the value from crypto and blockchain technology will accrue to equities over tokens, was confirmed by market price action. Concentration in mining and AI is still high, and we intend to keep broad this theme while remaining wary of downside potential. Our move into power and grid infrastructure continues, with the goal of diversifying the return base without giving up the upside the miners provide.

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• With a 13.36% yield, the MORT ETF provides broad, diversified mREIT exposure
• The BIZD ETF, currently yielding 9.13%, provides access to private-credit-like yield without sacrificing liquidity
• The HYEM ETF offers EM high yield bond exposure, yielding 6.89%

^*Top performers are shown for information only; nothing herein should be construed as investment advice or recommendations. Other funds may have performed differently during the same period. Yield alone should not be the basis for an investment decision.

VanEck’s Top Income-focused ETFs^*

Ranked by current 30-Day SEC yield (as of June 2, 2026).

The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333, or for performance current to the most recent month end, visit: https://www.vaneck.com/us/en/education/investment-ideas/income-ideas/#ETF-Performance

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• Gold mining fundamentals are strong, yet many investors continue to overlook equities
• Trust, built through transparency, consistent delivery, and disciplined capital allocation, is key to a sector re-rating
• Smart consolidation and elite management teams are critical to attracting long-term institutional capital

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

The gold price closed at $4,540.26 per ounce on May 29 — down $77.59 per ounce, or 1.68% for the month. Positively, the gold mining stocks posted gains, despite gold’s loss for the month. The MarketVector Global Gold Miners Index (MVGDXTR)¹ was up 1.11% for the month, while the MVIS Global Junior Gold Miners (MVGDXJTR)² was up 2.08%.

Trust Is the Missing Commodity in Gold Equities

The Australian Financial Review (AFR) Mining Summit took place in Perth on May 27, 2026. We had the opportunity to participate in a panel: “Wall Street to Australia: Setting the Scene for Global Gold,” and shared our perspective on the dynamics we see at play in gold equity markets today. We have a long history as managers of precious metal investment strategies. Today, everything seems to be going right in the sector, but it still doesn’t get much attention. We talked about how to make the gold equity case compelling enough and consistent enough that the broader investment community starts to see what we see: owning the miners is worth it despite all the additional complexity and risk. We made a direct case to gold mining companies about what we think are some of the steps this industry can take to help put gold equities on the radar of global investors. The title of our presentation said it plainly: “Trust is the missing commodity in gold equities.”

Why Aren't Generalist Investors Buying Gold Mining Stocks?

We started with the obvious question, “Why isn’t capital flowing into gold mining equities?” Gold is trading near all-time highs. Producers are carrying the strongest balance sheets they've had in a generation. Margins are at record levels, and free cash flow is strong. Management teams, by and large, are showing more discipline than this sector has historically been known for. By almost every conventional measure, the conditions for a sustained re-rating of gold equities are firmly in place.

And yet generalist investors are largely absent. The capital that could flow into this sector — that this sector deserves — is sitting on the sidelines, going into physical gold ETFs, or being deployed somewhere else entirely. The operating leverage, the dividend growth, the exploration upside that owning the miners offers over simply holding the metal — none of it appears to be compelling enough to draw in the broader investment community.

That is the central paradox we put to the room. Everything is aligned. So why isn't the capital flowing?

What Investors Are Really Saying About Gold Equities

We spend a lot of time talking to existing and potential clients about gold equities, and the same theme emerges in almost every conversation. It's not skepticism about gold. It's a lack of trust in gold equities as the right vehicle to get exposure to it.

In our presentation at the AFR summit, we laid out some of the most common fears that may be keeping generalist capital on the sidelines:

• Poorly-conceived M&A

  The worry that management will spend the windfall on acquisitions that destroy value rather than return it.

• Cost creep

  The expectation that guidance will slip just as gold's strength should be flowing through to earnings.

• Dividend fragility

  The concern that distributions will disappear the moment the cycle turns.

• Low returns

  The experience of mediocre project development and unnecessary overhead eating into what should be strong margins.

• Hard-to-manage risk

  Geopolitical, environmental, social — that feels too opaque for generalist allocators to underwrite with confidence.

These fears are not irrational. They are the accumulated memory of a sector that has let investors down in the past. Acknowledging that history honestly, rather than dismissing it, was an important part of the message we delivered.

How Gold Mining Companies Can Build Investor Trust

The heart of our presentation was a framework — six principles that, consistently applied, we believe have the potential to convert skeptical capital into committed shareholders. We weren't speaking to investors in the room. Our message was directed to management teams across this industry.

1. Protect gold price leverage

   Defend margins and resist hedging. The primary reason investors choose gold equities over the metal is leverage to the gold price. Hedging away too much of that upside removes the central investment proposition.

2. Meet your numbers

   Set guidance you can beat and then meet it or beat it — every time. A consistent track record of delivery compounds into a valuation premium. Under-promise, over-deliver is not just a communication strategy; it is a cultural signal that investors read clearly.

3. Define value creation

   State publicly what metrics you use to measure it — ROIC target, hurdle rate for new projects, cash flow per share, etc. — and then report against them every period. If a company won't measure it, the market won't believe it.

4. Be accountable

   This is a complex and risky business, and things will go wrong. The test is not whether problems arise, but how management responds when they do. Own it early, explain it clearly, and show what has changed.

5. Keep it simple

   One strategy, consistently executed. The best gold companies are boring in the best possible way. Additional complexity — too many jurisdictions, too many pivots, too many competing priorities — is a red flag for anyone trying to build lasting conviction.

6. Justify M&A and then track it

   Almost every company announces an acquisition with a detailed synergy case. Almost no track or disclose whether those synergies were actually delivered. Same applies to organic projects and their expected returns. That silence is corrosive. This single change would do a great deal for sector re-rating.

The Scarcest Resource: Elite Management

Management is a large component of a company’s success and for sure the foundation of investor trust — yet elite leadership may be the scarcest resource in the entire industry. We talk a great deal about Tier 1 assets, but what this sector truly needs more of is Tier 1 teams: operators with the skill and discipline to produce gold profitably from even the most challenging deposits.

We talked about what elite management actually looks like in practice: a proven track record through a full cycle, not just a bull market; operational credibility built on genuine technical and regional expertise; capital allocation discipline applied to both organic growth and M&A; communication quality that is transparent under pressure; organizational stability and succession depth beyond the CEO; and real skin in the game through personal ownership and compensation structures tied to long-term performance.

Right now, this sector has more companies and assets than it has great management teams to run them. Poor leadership destroys value at every stage of the mining cycle — and we've all seen it. This is a core structural risk that, in our view, calls for consolidation across the sector.

The Consolidation Case

We were direct about where we stand on sector consolidation: the case for it is real, but the type of consolidation matters enormously. Not all deals are created equal, and we wanted to be specific.

What we support is regional and geographic consolidation — hub-and-spoke district models where assets share infrastructure, equipment, labor, and technical expertise, and where the synergies are real and achievable. Portfolio rationalization, thoughtful entry-level equity investments in earlier-stage companies, and multi-party transactions structured to achieve the best outcome — these are the kinds of moves that we believe have the best potential to create durable value.

What we push back on is consolidation for scale alone. Increased cross-continent complexity, diluted management focus, synergies promised and never measured, integration risk chronically underestimated — these are the patterns that erode trust across the whole peer group, including the well-run companies that don't deserve to be tarred with the same brush.

What we want to see is growth that makes genuine strategic sense: manageable portfolios of no more than six to eight operations, regional know-how that can be meaningfully leveraged, clearly stated synergy cases, and honest post-mortems. The deeper argument ties directly back to management scarcity — the most powerful thing consolidation can achieve is placing more assets into fewer, better hands. Scale also matters for a practical reason: most institutional mandates have minimum liquidity thresholds. A fragmented sector of small-caps is structurally difficult for large generalist allocators to own, regardless of how compelling the gold story is.

The Re-Rating for Gold Equities

We closed our presentation with an optimistic message. The idea that trust is the foundation. Build it, and the capital will come. A small allocation from the generalist pool has large implications for the whole sector. Companies that earn that trust should also be able to retain their shareholders through downturns if they can consistently demonstrate the ability to navigate the cycles.

The opportunity in front of this sector is larger than the next quarterly result or the next resource upgrade. If the industry stays on its current path — disciplined, transparent, accountable — gold mining equities can earn something that has long eluded them: a permanent place on the radar of global investors. A recognized allocation sleeve, held structurally, alongside other real assets in sophisticated portfolios around the world. Not owned opportunistically when gold spikes but held because the case is compelling and the trust has been built. The rerating the sector has long been waiting for feels genuinely within reach.

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• The S&P 500 gained 5.26% in May, but leadership was narrow, with mega-cap tech driving most of the gain.
• Quarterly earnings from software and cybersecurity companies countered fears that AI would displace enterprise software.
• The Moat Index rose 3.34%, lifted by Fortinet (+60%) and Datadog (+80%) as cybersecurity and software surged.
• The SMID Moat Index rose 2.22%, with tech gains offset by weakness in energy and materials.

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. equities extended their advance in May, with the S&P 500 gaining 5.26% to reach record highs in a second consecutive monthly gain. Leadership remained narrow, as the cap-weighted S&P 500 Index outpaced the S&P 500 Equal Weight Index by more than 2.5% and the Nasdaq Composite rose 8.43%. Technology was again the clear leader, but the rally broadened beyond semiconductors as strong earnings from software and cybersecurity companies eased earlier concerns that artificial intelligence (AI) would erode demand for enterprise software. Energy was the weakest area of the market as crude prices eased. With no Federal Reserve meeting in May, monetary policy stayed in the background after the central bank held rates steady at its late-April meeting.

The Morningstar Wide Moat Focus Index (the “Moat Index”) gained 3.34% in May, again trailing the S&P 500 in a narrow, technology-led market that has favored mega-cap names in recent months. The Index spent much of the month in modestly negative territory, down more than 1% by mid-month even as the benchmark pushed to new highs, before a late-month rally in its software and cybersecurity holdings lifted it into positive territory. Both sector allocation and stock selection weighed on relative performance. The Index’s equal-weighted, valuation-conscious construction limited its exposure to the mega-cap technology names that drove much of the benchmark’s gain, while overweights to lagging defensive sectors added to the shortfall.

The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 2.22% in May, roughly in line with the S&P MidCap 400’s 2.45% gain and leading the S&P SmallCap 600, which advanced 1.04%. Smaller-cap stocks broadly trailed large-caps during the month, a reversal from April, as narrow large-cap leadership reasserted itself. As with the Moat Index, the SMID Moat Index drew its strongest contributions from technology holdings, particularly software, cybersecurity, and semiconductor names tied to the artificial intelligence infrastructure theme. Sector allocation was a modest tailwind, while stock selection was a slight drag, with weakness among materials holdings offsetting some of the strength in technology. The Index followed a similar intra-month path to its large-cap counterpart, slipping early in the month before rallying in the final stretch.

Software and Cybersecurity Lead Equities Higher in May

Source: Morningstar. Data as of 5/31/2026. 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: Software and Cybersecurity Strength Amid a Narrow Rally

May was another challenging month for the Moat Index on a relative basis, as both sector allocation and stock selection trailed the S&P 500 during a narrow, technology-led advance. The equal-weighted approach limited the Index’s participation in the mega-cap technology and semiconductor names that led the benchmark, while overweights to defensive sectors weighed further. Even so, the Index was supported by a concentration of strong contributions from software and cybersecurity holdings that capitalized on a broadening of the AI trade beyond semiconductors.

Fortinet Inc. (FTNT) and Palo Alto Networks Inc. (PANW) were among the leading contributors, as cybersecurity names rallied on growing recognition that AI is expanding, rather than shrinking, the market for security. Fortinet shares advanced more than 60% after the company reported strong quarterly earnings results and raised its full-year sales outlook, with management emphasizing that every new AI deployment widens the corporate attack surface and increases demand for protection. Morningstar continues to view Fortinet’s wide moat as supported by customer switching costs and a network effect that strengthens as more threat data flows across its platform. Palo Alto Networks gained approximately 57%, helped by industry developments reinforcing that AI model providers increasingly view large security vendors as partners. Morningstar assigns Palo Alto a wide moat, underpinned by high switching costs across its network, cloud, and security operations platforms, and continues to view the shares as trading below its fair value estimate.

Datadog Inc. (DDOG) and Oracle Corp. (ORCL) led a broader recovery in enterprise software, as strong results eased fears that artificial intelligence would displace traditional software business models. Datadog shares rose more than 80% after the observability software provider reported a strong quarter and pointed to artificial intelligence as an accelerating source of demand for its monitoring tools. Morningstar continues to assign Datadog a wide moat, supported by switching costs and network effects that deepen as more customer data flows through its platform. Oracle advanced roughly 40%, supported by momentum in its cloud infrastructure business and rising demand tied to AI model training and the broader data-center buildout, areas where the stickiness of its database and enterprise software offerings supports durable customer relationships.

Companies detracting the most from Moat Index performance were concentrated in defensive and value-oriented areas of the market that were overlooked during the technology-led advance. Zoetis Inc. (ZTS), an animal health company, was the largest detractor following a sharp decline in its shares. LPL Financial Holdings Inc. (LPLA), a brokerage platform; Constellation Brands Inc. (STZ), a producer of beer, wine, and spirits; Huntington Ingalls Industries Inc. (HII), a defense shipbuilder; and Otis Worldwide Corp. (OTIS), an elevator and escalator manufacturer, also weighed on results. The group spanned health care, financials, consumer staples, and industrials, reflecting the broad rotation away from defensive holdings as investors favored higher-growth technology names.

Moat Index Top Contributors and Detractors - May 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: Technology Leadership Extends Across Market Caps

The SMID Moat Index also drew its strongest contributions from technology, where software, cybersecurity, and semiconductor holdings tied to the AI theme led performance. Sector allocation was a modest tailwind during the month, while stock selection was a slight drag, with weakness among materials holdings the primary offset.

Several of the same software and cybersecurity names that lifted the Moat Index contributed here as well. Datadog Inc. (DDOG), held in both indexes, was the top contributor as its observability platform benefited from accelerating AI-driven demand, and Fortinet Inc. (FTNT) added to gains on the same cybersecurity strength. Akamai Technologies Inc. (AKAM), a distributed network, security, and cloud computing provider, advanced approximately 45% as investors responded to its expansion into AI edge computing, including a multiyear agreement to supply compute capacity to a large AI model developer.

Semiconductor holdings tied to AI infrastructure also contributed meaningfully. Marvell Technology Inc. (MRVL), a repeat top contributor in recent months, advanced more than 20% after raising its growth outlook, with Morningstar pointing to accelerating demand for its custom AI silicon and optical connectivity chips and viewing the shares as undervalued. Morningstar assigns Marvell a narrow moat, supported by intangible assets in networking chip design and customer switching costs. ON Semiconductor Corp. (ON) rose roughly 20% as signs of a cyclical recovery in automotive and industrial chip demand were reinforced by growing exposure to data center power. Morningstar views ON Semiconductor’s narrow moat as supported by a cost advantage in power chips and intangible assets in its automotive image sensors.

Companies detracting the most from SMID Moat Index performance were concentrated in energy and materials, areas pressured by soft commodity prices during the month. Devon Energy Corp. (DVN), an oil and gas producer, extended the weakness among energy names that has persisted as the sector’s geopolitically driven gains earlier in the year unwound. Celanese Corp. (CE) and Albemarle Corp. (ALB), both specialty chemical producers, also declined, alongside Vontier Corp. (VNT), a mobility and industrial technology company, and Oshkosh Corp. (OSK), a specialty vehicle manufacturer. The concentration among commodity-linked and cyclical names reflected the market’s clear preference for technology and growth during the month.

SMID Moat Index Top Contributors and Detractors - May 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.

Choose Your Moat Strategy

VanEck’s suite of moat investing strategies is powered by Morningstar’s equity research team, which seeks quality companies trading at attractive valuations. The below ETFs offer access to US moat companies:

VanEck Morningstar Wide Moat ETF (MOAT): companies with a wide moat rating, which means Morningstar believes the company is likely to sustain its competitive advantage for at least the next 20 years.

VanEck Morningstar SMID Moat ETF (SMOT): small and mid-cap moat companies.

VanEck Morningstar Wide Moat Value ETF (MVAL): wide moat companies within Morningstar’s value style category.

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• Mega-caps drive sector returns, but most ETFs can't fully own them. Regulatory caps force funds to underweight the companies that matter most.
• The 25/5/50 rule creates a hidden gap in sector exposure. Investors may think they own the sector, but caps quietly reshape what they actually hold.
• TruSector ETFs use a hybrid structure to close that gap. TRUT, TRUD, TRUC, TRUF, TRUH, TRUO and TRUI deliver uncapped market-cap exposure while staying RIC compliant.

The Role of Mega-Cap Companies in Sector Returns

The U.S. equity market looks very different than it did even five years ago. A small group of mega-cap companies now account for an outsized share of their sectors' market capitalization, earnings, and returns.

The technology sector is the clearest example. As of early 2026, tech represents over 43% of the S&P 500's total market capitalization and roughly 36% of its earnings. Within the sector, the concentration is even more lopsided: NVIDIA, Apple, and Microsoft make up a huge portion of the information technology sector's total weight. In consumer discretionary, Amazon and Tesla hold similarly dominant positions, and in communication services, Alphabet and Meta Platforms tower over the rest.

This isn't a coincidence. These companies are the engines of sector performance. In 2025, information technology and communication services together accounted for over 63% of the S&P 500's total return. Without those two sectors, the index would have returned roughly 6%.

For investors who want targeted sector exposure, the takeaway is simple: capturing the performance of these leading companies isn't optional. Any sector strategy that systematically underweights them is going to face meaningful performance drag.

How RIC Diversification Caps Distort Sector Exposure

Most ETFs in the United States are structured as Regulated Investment Companies (RICs) under the Internal Revenue Code. This structure lets funds pass through income and gains to shareholders without paying corporate-level tax. But to qualify, RICs must meet quarterly diversification tests, commonly known as the 25/5/50 rule:

• No single company can represent more than 25% of the fund's total assets.
• All positions exceeding 5% each cannot, in aggregate, exceed 50% of the fund.

These rules exist to protect investors from excessive concentration risk. For broadly diversified portfolios, they're a non-issue. But in today's concentrated sectors, they create real distortions.

Look at technology. In an uncapped, true market-cap representation of the tech sector, NVIDIA and Microsoft alone can account for over 40% of the sector's weight. RIC rules don't allow that. So a traditional tech sector ETF has to scale those names back and push that weight into smaller companies that contribute far less to sector performance.

What does this mean in practice? Investors who buy a traditional technology sector ETF may think they're getting full, representative exposure to the sector. But they're actually holding a portfolio that's been reshaped by regulatory constraints, one that underweights the companies driving returns and overweights names with a smaller economic footprint.

Sector-by-Sector Breakdown: Where Capping Hurts Most

The distortion from RIC caps isn't the same everywhere. It hits hardest in sectors where a few large names make up the bulk of the market cap.

Information Technology: Tech is the most affected sector. Names like NVIDIA, Apple, Microsoft, and Broadcom command a huge share of the sector's market cap. Capping forces traditional sector funds into a structural underweight relative to these companies' true market-cap weight. On the surface the portfolio looks like the tech sector; underneath, it behaves quite differently.

Consumer Discretionary: Mega-cap e-commerce and retail names, most notably Amazon and Tesla, drive the majority of this sector's performance. Under capping rules, their influence gets diluted, and exposure shifts toward smaller retailers and consumer companies that contribute less to overall returns.

Communication Services: A small number of streaming, social media, and digital advertising companies dominate this sector, including Alphabet, Meta Platforms, and Netflix. When these names get capped, benchmark alignment breaks down, introducing performance drag and unintended tilts toward less impactful holdings.

Across all five sectors, the pattern is the same: the companies that investors most want exposure to are exactly the ones that regulatory caps force funds to underweight.

Tracking Error and What It Means for Sector Investors

The practical cost of RIC-driven capping is tracking error, or the volatility of the gap between a sector fund's performance and that of an uncapped sector benchmark, many investors often follow.

For asset allocators and model portfolio managers, tracking error is more than a technical footnote. It chips away at the precision of portfolio construction. If a sector allocation is meant to express a specific market view (say, a conviction in technology's growth trajectory) the effectiveness of that view depends on the fund closely mirroring the actual makeup of the sector.

Traditional capped sector ETFs often fall short here. Redistributing weight away from mega-cap leaders and into smaller names introduces stock-level biases and performance differences that compound over time. What looks like a clean sector bet may carry embedded distortions that quietly erode its effectiveness.

For investors who care about attribution clarity and precise exposure, reducing tracking error relative to uncapped benchmarks is a real, tangible improvement.

The Case for True Market-Cap Sector Investing

If the goal of sector investing is to capture the economic reality of a market segment, then the approach should reflect how that sector actually exists in the marketplace, not an artificially capped version of it.

True market-cap sector exposure means holding each company at its natural weight, as the market determines it. When NVIDIA represents a significant share of the technology sector's value, the portfolio should reflect that rather than capping it at an arbitrary threshold and redistributing the difference into smaller positions.

This matters for several practical reasons. It produces cleaner attribution, since returns tie more directly to true sector dynamics rather than capping’s unanticipated consequences. It cuts down on unintended stock-level biases, making sector investing more precise. And it aligns the portfolio with the actual performance drivers of the market instead of a regulatory approximation of them.

As sectors have become more concentrated, fueled by the scale advantages and AI-driven growth of mega-cap tech and platform companies, the gap between capped and uncapped sector exposure has only widened. For allocators building portfolios around sector views, closing that gap matters more now than it used to.

Accessing Precise Sector Exposure with VanEck TruSector ETFs

VanEck's TruSector ETFs were built to address this structural problem. The suite currently includes five actively managed ETFs targeting the sectors most affected by capping distortions:

• VanEck Technology TruSector ETF (TRUT): Full market-cap exposure to the information technology sector.
• VanEck Consumer Discretionary TruSector ETF (TRUD): Full market-cap exposure to the consumer discretionary sector.
• VanEck Communication Services TruSector ETF (TRUC):Full market-cap exposure to the communication services sector.
• VanEck Financials TruSector ETF (TRUF):Full market-cap exposure to the financials sector.
• VanEck Healthcare TruSector ETF (TRUH): Full market-cap exposure to the healthcare sector.
• VanEck Consumer Staples TruSector ETF (TRUO): Full market-cap exposure to the consumer staples sector.
• VanEck Industrials TruSector ETF (TRUI): Full market-cap exposure to the industrials sector.

Each fund uses a hybrid structure that combines direct equity holdings with positions in targeted sector ETFs. The funds hold individual sector stocks up to the maximum allowed by RIC rules, then pick up supplemental exposure through other sector ETFs. Because RIC diversification rules don't "look through" to the underlying holdings of other RICs, those positions do not count toward issuer concentration rules. The result is funds that can offer the economic exposure similar to an uncapped sector benchmark while staying fully RIC compliant.

In practice, this means TruSector ETFs maintain uncapped exposure to each sector's leading contributors (or detractors), avoid the overallocation to smaller names that may plague traditional sector funds, and deliver tighter tracking relative to widely followed benchmarks, all with the operational simplicity and liquidity that ETF investors expect.

For asset allocators who want to express sector views with greater accuracy, VanEck's TruSector ETFs offer a sharper tool for portfolio construction in a market that keeps getting more concentrated.

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• Technology leadership in 2026 is expanding beyond a single AI trade, with innovation accelerating across biotechnology, gaming, space infrastructure, robotics and semiconductors.
• VanEck’s BBH, ESPO, WARP, IBOT and SMH ETFs provide targeted exposure to distinct areas of the innovation economy.
• Gilead Sciences, NetEase, Rocket Lab, ABB and NVIDIA show how technology is reshaping healthcare, digital entertainment, connectivity, industrial automation and AI infrastructure.

The Tech Landscape in 2026: What Has Changed

Technology is no longer just a software story. As AI moves deeper into the economy, the companies enabling it now span semiconductors, robotics, electrification, gaming, space and biotech. Compute capacity depends on chips and advanced manufacturing, automation relies on sensors and industrial control systems, and space infrastructure is becoming a new layer for communications and data.

The 2026 technology landscape is not being shaped by one company or subsector. Innovation is spreading across the industries and systems that support the next phase of growth.

Five Tech Companies to Watch Across VanEck ETFs

1. Gilead Sciences Inc. (GILD)

ETF exposure: Top holding in BBH at 14.25% of net assets as of 05/21/2026.

• What They Do: Gilead Sciences is a global biopharmaceutical company with a portfolio spanning HIV, liver disease, oncology and inflammation. From a technology perspective, Gilead represents the life-sciences side of innovation: using molecular biology, clinical data and advanced drug development to create therapies for complex diseases.
• 2026 Watch Point: The biotech opportunity is increasingly tied to precision medicine, data-driven research and more efficient drug development. Gilead brings scale, commercial depth and pipeline breadth to a sector where innovation cycles can be long, highly regulated and clinically uncertain.

2. NetEase Inc. (NTES)

ETF exposure: Top holding in ESPO at 7.94% of net assets as of 05/27/2026.

• What They Do: NetEase develops and publishes online games across PC and mobile platforms and operates durable franchises in the global gaming market. The company sits at the intersection of consumer technology, digital entertainment, live-service content and online communities.
• 2026 Watch Point: Gaming companies are becoming important consumer-facing technology platforms. AI-assisted development, user-generated content, virtual economies and global live-service operations can change how games are built, updated and monetized. NetEase highlights the continued evolution of digital engagement, where content, community and intellectual property remain central to the technology ecosystem.

3. Rocket Lab Corp. (RKLB)

ETF exposure: Top holding in WARP at 9.57% of net assets as of 05/27/2026.

• What They Do: Rocket Lab provides launch services, spacecraft systems and mission solutions for commercial and government customers. Its Electron rocket has made the company a leading small-launch provider, while its spacecraft and components businesses broaden its role beyond launch into the infrastructure layer of the space economy.
• 2026 Watch Point: The space economy is moving from exploration toward infrastructure: launch, satellites, Earth observation, communications and space data. Rocket Lab reflects the growing importance of space infrastructure as connectivity, defense, climate monitoring and data services become more dependent on assets in orbit.

4. ABB Ltd. (ABBN SW)

ETF exposure: Top holding in IBOT at 5.81% of net assets as of 05/27/2026.

• What They Do: ABB is a global electrification and automation company with products and systems spanning robotics, motion, power distribution, industrial controls and digital automation. Its technology helps factories, utilities, buildings and data centers become more automated, efficient and connected.
• 2026 Watch Point: AI needs physical systems to act on the world. ABB is positioned in the layer where software, sensors, robots, power systems and industrial equipment come together. As data centers, manufacturers and utilities invest in automation and electrification, ABB remains tied to the infrastructure that connects digital intelligence with physical operations.

5. NVIDIA Corp. (NVDA)

ETF exposure: Top holding in SMH at 15.42% of net assets as of 05/27/2026.

• What They Do: NVIDIA designs GPUs, networking products, software libraries and full-stack computing platforms used for AI training, inference, simulation and accelerated computing. Its ecosystem has made the company one of the most important suppliers to data centers and AI developers.
• 2026 Watch Point: NVIDIA remains central to the semiconductor and AI infrastructure story. Its GPUs, networking systems and software ecosystem help power many of today's most advanced AI workloads, making the company a natural anchor for the compute layer of the technology market.

Five Different Sides of the 2026 Technology Story

Technology leadership has expanded across the physical, biological and digital economy. Gilead Sciences highlights biotech innovation in virology, oncology and precision medicine, NetEase points to interactive entertainment and digital engagement, Rocket Lab represents space infrastructure, ABB brings robotics and electrification, and NVIDIA remains central to AI computing.

Together, these companies show how the next phase of technology growth is being built across multiple forms of infrastructure, biological, digital, orbital, industrial and semiconductor.

How VanEck ETFs Provide Exposure Across Tech Themes

A multi-fund approach gives investors exposure to different areas of technology innovation. BBH focuses on biotech, ESPO on video gaming and esports, WARP on space infrastructure, IBOT on robotics and automation, and SMH on semiconductors.

Rather than relying on a single mega-cap name or one AI infrastructure category, these ETFs connect investors to five distinct corners of the technology market: health care innovation, digital entertainment, commercial space, industrial automation and semiconductor production.

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• Rare earths and copper remain critical to AI, defense, electrification and broader industrial resilience.
• Supply chain vulnerability is becoming a structural issue, not just a short-term geopolitical risk.
• Building rare earth supply outside China may require years of coordinated investment across mining, processing, magnet manufacturing and recycling.
• Copper supply remains constrained by declining grades, deeper mines, project delays and rising capital intensity.
• Resource equities may offer a broader opportunity set as disciplined capital spending, higher commodity prices and stronger free cash flow support shareholder returns.

Rare earths and copper are no longer niche commodity stories. They sit at the center of several of the world’s most urgent structural themes: AI infrastructure, defense modernization, grid expansion and supply chain security.

Recent price action reflects more than short-term geopolitical volatility. Copper has rallied near all-time highs, while rare earth prices remain elevated as export controls, national security concerns and underinvestment expose the limits of today’s supply chains. In rare earths especially, the challenge is not simply mining more material. It is building an integrated, ex-China supply chain that can span mining, separation, alloying, magnet production and recycling.

Highlights from the conversation:

Supply chain vulnerabilities are being exposed — Recent geopolitical events have again highlighted how fragile commodity supply chains can be. While energy markets often receive the most attention, the impact has extended into metals, mining inputs and critical materials. The result may be continued pressure on both volumes and production costs, creating a more supportive environment for select commodities.

Rare earth prices reflect geopolitical scarcity — Neodymium-praseodymium, often used as a proxy for rare earth pricing, has experienced significant volatility driven by export controls and geopolitical tension. China controls the dominant share of rare earth supply and has restricted exports of both rare earth materials and magnet-making equipment. With limited near-term relief, rare earth prices may remain supported.

Rare earths have an outsized economic impact — Rare earths represent a small physical market, but they play an essential role in aerospace, defense, electronics, communications and transportation. Substitution is difficult in many of these applications, especially where high-strength, high-heat permanent magnets are required.

Defense and robotics may drive magnet demand — Permanent magnets vary by strength and heat tolerance. Defense applications typically require some of the highest-performance magnets, while robotics demand very strong magnets as automation expands. Across transportation, defense, robotics and communications, permanent magnet demand could rise meaningfully over the next decade.

The ex-China supply chain remains incomplete — Western investment has begun to flow into rare earth mining and separation, but the largest opportunity may lie further downstream in alloys, magnets and recycling. A fully integrated “mine-to-magnet” supply chain will require investment across several stages, many of which remain underdeveloped outside China.

Rare Earths: Why the Supply Chain Challenge Is Bigger Than Mining

Mining is only one piece of the rare earth supply chain. Building a competitive ex-China ecosystem also requires separation, alloying, magnet manufacturing and recycling capacity.

China currently dominates multiple stages of the rare earth value chain, from raw material supply to separation, alloying, magnet production and recycling. Western governments have responded by supporting domestic mining and processing capacity, including price floors and strategic investments. But building a competitive alternative will likely take years.

Rare Earth Dependence Exposes $1.2T of U.S. Economic Activity

Takeaway: Many exposed industries have limited near-term substitutes, increasing vulnerability to supply disruptions or export controls.Reducing dependence requires years of investment across mining, separation, refining, recycling and magnet production.

Source: Bloomberg Economics. Data as of May 2026. For illustrative purposes only.

The opportunity may be especially meaningful in downstream parts of the chain. Separation, magnet manufacturing and recycling are all critical to reducing reliance on imports. Recycling, in particular, remains underappreciated. China produces a meaningful share of its permanent magnets from recycled material, including end-of-life and factory-floor recycling. Outside China, this infrastructure remains far less developed.

The broader implication is that rare earth supply security will likely require a coordinated effort among governments, private companies, investors and end users. This is not a short sprint to bring a few mines online. It is a long-term industrial buildout.

Copper Supply: A Structural Constraint, Not a Temporary Shortage

Copper faces a different but equally important challenge. Unlike rare earths, copper is a much larger and more liquid global market. But supply growth remains difficult.

Long-term constraints include declining ore grades, fewer major discoveries, project delays and increasing capital intensity. New copper projects are becoming more expensive, more complex and harder to develop. Mines are also getting deeper, which can increase operating costs, capital costs and technical risk.

One example is the growing complexity of deep underground projects. Deeper mines often require more infrastructure, ventilation, power, cooling and material movement. These requirements can make future supply more expensive and slower to bring online.

Major Copper Discoveries Are Getting Deeper

Takeaway: Recent copper discoveries are increasingly deeper, making development more complex, costly and technically challenging. As easier-to-access deposits are depleted, future supply growth may require longer timelines and higher capital investment.

Source: VanEck, Bloomberg. Data as of December 2025. For illustrative purposes only. Not a projection of future results. Past performance is not indicative of future results. Short-term geopolitical dynamics have added another layer. Copper production depends on key inputs such as sulfuric acid, and disruptions around the Strait of Hormuz region have raised concerns about availability and cost. Sulfuric acid prices have risen sharply, adding pressure to production costs and reinforcing the idea that copper may have stronger cost support than in prior cycles.

AI, Grid Buildout and Critical Metals Demand

AI infrastructure remains a major long-term demand theme, but the metals impact may unfold in phases.

The first phase is physical construction: concrete, steel, buildings and supporting infrastructure. The second phase involves generation, connectivity, grid upgrades and power availability. Metals and minerals become increasingly important as data centers move from construction to full energy integration.

Utilities and data center operators are already thinking years ahead about power supply. That planning has implications for copper, uranium, steel, aluminum and other critical resource markets. While it may be too early to identify the exact point at which metals shortages could slow AI infrastructure deployment, the direction of travel is clear: AI will require more physical materials, more power and more resilient supply chains.

Capital Discipline: Why Resource Equities Look Different This Cycle

Mining companies are behaving differently than in prior cycles.

Rather than chasing volume growth at any cost, many companies are focused on financial discipline, balance sheet strength and shareholder returns. Capital expenditures have plateaued, and companies are increasingly mining for profit rather than simply mining for production growth.

That matters for investors. Higher commodity prices, combined with disciplined spending, can improve free cash flow generation. Many resource companies have adopted capital allocation frameworks that split cash flow between reinvestment and shareholder returns. In some cases, this has translated into attractive free cash flow yields and the potential for dividends or buybacks.

This discipline may be especially important because the opportunity set has broadened. The discussion was not limited to rare earths and copper. Gold, lithium, diversified miners, energy and other resource-related equities may also benefit from supply constraints, geopolitical uncertainty and structural demand growth.

Lithium and Battery Materials: A More Positive Setup

Although rare earths and copper were the primary focus, lithium also entered the discussion.

The lithium market has remained nuanced, but conditions appear more constructive than they were several months ago. Some oversupply from China has faded, while production downgrades at major assets such as Greenbushes in Australia have helped improve the supply picture. Demand is also broadening beyond electric vehicles into battery packs and other storage applications.

This does not eliminate volatility, but it may provide a firmer price floor for select Western lithium producers.

The Equity Opportunity: Selectivity Matters

For investors, the central message is not simply that commodity prices could move higher. Selectivity is becoming more important.

Rare earth companies may benefit from national security priorities and government support, but many still face financial, operational and execution risk. Some companies are scaling from pilot operations to commercial production, which can be a difficult transition. China also remains a major competitive force, with established revenue, cash flow and operating capacity.

Copper producers and diversified miners may offer a different profile. Many have operating assets, stronger balance sheets and more visible free cash flow. In an environment where supply constraints and cost inflation support commodity prices, established producers may be well positioned.

VanEck offers several ways to access these themes, including:

VanEck Rare Earth and Strategic Metals ETF (REMX) — Provides global exposure to companies involved in mining, refining and recycling rare earths and strategic metals, including materials tied to AI, defense, electrification and advanced technologies.

VanEck Copper and Electrification ETF (EMET) — Offers exposure to companies involved in copper and other critical electrification metals, including those tied to grid expansion, data centers and clean energy infrastructure.

VanEck Global Resources Fund — A diversified resource equity strategy that provides exposure across natural resources, including base metals, critical metals, energy, agriculture and precious metals.

What Investors Should Watch Next

The next phase of the critical metals story may be shaped by several developments.

First, rare earth policy support is likely to remain a major factor. Price floors, government investment, export controls and defense procurement could all influence the pace of ex-China supply development.

Second, copper supply remains structurally challenged. Declining grades, deeper mines, fewer major discoveries and higher capital intensity suggest that new supply may struggle to keep pace with demand.

Third, AI and defense demand are still evolving. As data center construction moves toward power generation, grid connectivity and equipment deployment, the metals intensity of the AI buildout may become more visible.

Finally, investors should watch whether capital discipline holds. If mining companies continue prioritizing balance sheets, returns and profitability, resource equities may remain attractive even if commodity markets remain volatile.

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• AI infrastructure demand is extending well beyond software into chips, power, cooling, networking and real estate
• Power is emerging as a key bottleneck, pulling utilities, nuclear energy and grid equipment into the AI investment conversation
• RACK targets companies across four supply chain segments: semiconductors, nuclear energy, data center solutions, and power infrastructure

The AI investment opportunity is expanding beyond software, models and platforms. As adoption grows, more advanced workloads require greater compute capacity and the infrastructure to support it.

That demand is making data centers a larger and more important investment theme. Data centers are where chips, memory, servers, networking equipment, electricity and cooling systems come together to power the next generation of digital workloads. As a result, pressure is building across the data center supply chain, from semiconductors and storage to power equipment, cooling technologies, grid infrastructure and real estate.

The VanEck Data Center Supply Chain ETF (RACK) is designed to provide targeted exposure to this opportunity by investing in companies contributing to the buildout and operation of data center infrastructure. Rather than focusing only on the most visible AI companies, RACK looks across the supply chain to the businesses helping build, power, cool and connect the infrastructure needed to support rising AI demand.

The Investment Case for Data Center Infrastructure Looks Different Today

For many investors, AI has been discussed primarily through the companies building models, applications and cloud platforms. But the next phase of the theme may depend just as much on the companies supplying the physical infrastructure.

Every AI model, chatbot response and autonomous system requires compute infrastructure: servers, chips, storage, networking, power and cooling housed in data centers. As demand rises, the constraints are appearing across several layers at once.

This is what makes the current cycle different. It is not just a semiconductor cycle, a power cycle or a real estate cycle. It is a coordinated infrastructure buildout. However, infrastructure cycles can also be subject to delays, overcapacity, policy changes and shifting technology priorities that may affect companies across the supply chain.

AI-Related Data Center Capex Through 2030 ($T)

Source: McKinsey, “The cost of compute: A $7 trillion race to scale data centers” (Apr 2025). Forecasts are based on current assumptions, are subject to change, and may not be realized.

McKinsey projects that global data center capacity demand could nearly triple by 2030, with roughly 70% driven by AI workloads. Even in the constrained scenario, the investment required is measured in trillions. Projections are based on current assumptions and may not be realized.

That spending is expected to flow across multiple parts of the ecosystem, including technology developers, power providers, builders, operators and AI infrastructure platforms.

Data Centers Are Becoming Infrastructure, Not Just Facilities

One of the most important shifts underway is that data centers are no longer simply buildings that house servers. They are becoming essential infrastructure for the digital economy.

The supply chain includes several key layers:

• Semiconductors and memory: chips, GPUs, accelerators, DRAM and high-bandwidth memory that enable AI training and inference.
• Networking and servers: the equipment needed to connect AI rack clusters and move data efficiently across facilities.
• Power and cooling: electrical systems, liquid cooling, power management and thermal technologies required for higher-density compute.
• Grid and energy infrastructure: transmission equipment, transformers, substations, off-grid generation and reliable baseload power sources.
• Data center operations: companies that own, operate, connect or support data center facilities and cloud infrastructure.

Taken together, these areas point to a broader reality: the data center supply chain is not a narrow technology theme. It is a multi-sector infrastructure theme.

Power Is Becoming a Key Bottleneck

Among the biggest constraints is power. AI workloads require significant electricity, and higher-density data centers need reliable, scalable energy sources.

This is pulling new parts of the market into the AI infrastructure discussion, including utilities, nuclear energy, grid equipment, transformers, substations, energy storage and cooling technologies.

US Data Center Power Demand (GW)

Source: S&P Global Commodity Insights / 451 Research, Oct. 14, 2025. Not intended as a forecast or prediction of future results. For illustrative purposes only.

The implication is straightforward: more compute capacity requires more power capacity. As data center demand grows, the companies helping deliver, manage and cool that power may become increasingly important to the broader AI investment case.

Why RACK?

The VanEck Data Center Supply Chain ETF (RACK) seeks to track the MarketVector Data Center Supply Chain Index, a rules-based, modified float-adjusted market capitalization weighted index designed to track U.S.-listed companies contributing to the buildout and ongoing operation of data centers across the supply chain.

Rather than focusing only on the hyperscalers spending on AI infrastructure, RACK focuses on the companies they may be spending with.

The index targets companies across four key areas:

1. Fabless Semiconductors and Quantum Computing
2. Nuclear Energy Producers
3. Data Center Solutions
4. Power Bridge

For initial inclusion, companies generally must generate at least 50% of revenues from eligible data center supply chain activities. The index also applies a 4.5% single-security cap and reconstitutes and rebalances quarterly.

That structure is designed to provide focused exposure to the companies supporting the physical buildout behind AI, while avoiding overconcentration in a small number of individual names.

What This Means for Investors

At VanEck, we have long believed that structural change can create demand for new infrastructure, new markets and new business models — though there is no guarantee that any investment theme will result in positive outcomes for investors.

The data center supply chain fits that framework.

This is not only a story about AI applications. It is a story about the infrastructure required to support growing compute demand: chips, servers, memory, networking, power, cooling, real estate and grid equipment.

For investors looking beyond the most visible AI companies, RACK offers a targeted way to access the businesses helping build and operate the infrastructure behind the theme.

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• What is the data center supply chain?
• Why is the data center supply chain a compelling investment theme right now?
• What is the VanEck Data Center Supply Chain ETF (RACK)?
• How is RACK different from other AI or technology ETFs?
• What parts of the data center supply chain does RACK target?
• Why use a pure-play approach to investing in data center infrastructure?
• Is RACK focused only on U.S. companies?
• What role can RACK play in a portfolio?
• What are the main risks investors should keep in mind?
• How does RACK fit within VanEck’s thematic ETF lineup?
• How to Buy VanEck ETFs?

What is the data center supply chain?

The data center supply chain refers to the companies enabling the buildout and operation of modern data centers. That includes businesses involved in semiconductors, memory and storage, networking equipment, servers, cooling systems, power equipment, grid infrastructure, nuclear energy and data center operations.

In simple terms, it is the physical layer of AI.

Why is the data center supply chain a compelling investment theme right now?

AI is creating a major infrastructure cycle. Demand for compute is rising quickly, and the supply chain is under pressure across multiple layers at once, including chips, memory, power and cooling.

What makes this cycle different is that AI does not scale through software alone. It requires physical capacity: more data centers, more energy, more networking and more specialized equipment. Companies that solve these bottlenecks may benefit as AI investment continues to move from experimentation to large-scale deployment.

What is the VanEck Data Center Supply Chain ETF (RACK)?

RACK is a passively managed ETF designed to provide targeted exposure to companies contributing to the buildout and ongoing operation of data centers.

The fund seeks to track the MarketVector Data Center Supply Chain Index, a rules-based index focused on U.S.-listed companies across data center infrastructure, equipment and services. The strategy is built to capture the companies supporting AI infrastructure, rather than only the hyperscalers spending on it.

How is RACK different from other AI or technology ETFs?

Many AI ETFs focus on software, platforms or broad technology exposure. RACK focuses on the infrastructure behind AI.

That means the fund can include companies tied to semiconductors, memory, data center equipment, power systems, grid modernization, nuclear energy and cooling technologies. The goal is to give investors access to the physical buildout required for AI to scale.

What parts of the data center supply chain does RACK target?

RACK’s underlying index is organized around four key areas:

Fabless Semiconductors and Quantum Computing

Companies involved in semiconductor design, hardware and quantum computing technologies.

Nuclear Energy Producers

Companies tied to uranium, nuclear power generation, nuclear reactor construction, maintenance, equipment or services.

Data Center Solutions

Companies involved in memory and storage, data center ownership or operation, networking equipment, servers, interconnection software and AI cloud platforms.

Power Bridge

Companies enabling energy storage, power management, cooling, off-grid generation, grid modernization, transmission, substations, transformers and cable connectivity.

Together, these categories reflect the full stack of infrastructure needed to support AI workloads.

Why use a pure-play approach to investing in data center infrastructure?

A pure-play approach matters because data center exposure can be diluted inside broad technology or industrial funds. Many companies may have some connection to AI infrastructure, but only a smaller group derives meaningful revenue from the theme.

RACK’s underlying index generally requires companies to generate at least 50% of revenues from eligible data center supply chain activities for initial inclusion. The index also applies single-security caps and rebalances quarterly.

Is RACK focused only on U.S. companies?

RACK’s underlying index includes U.S.-listed companies. However, many of those companies operate globally, reflecting the worldwide nature of the AI infrastructure buildout.

Data centers, power systems, semiconductor supply chains and cloud infrastructure are global markets, even when the securities are listed in the U.S.

What role can RACK play in a portfolio?

RACK can serve as a targeted thematic allocation for investors who believe AI growth will require sustained investment in physical infrastructure. For those who already own broad technology or mega-cap growth exposure, it offers a different way to access the AI theme.

The fund focuses on the suppliers and infrastructure providers behind the hyperscalers, fabless semiconductor and quantum computing names, memory, networking and server makers, data center operators, nuclear energy producers, and power bridge companies covering cooling, energy storage, grid modernization and transmission. The result is diversified exposure across a complex, multi-sector supply chain in a single vehicle.

What are the main risks investors should keep in mind?

Like any thematic equity strategy, RACK comes with meaningful risks. Data center supply chain companies may be affected by regulation, government spending, supply chain disruptions, cybersecurity incidents, geopolitical instability, skilled labor shortages, financing needs and rapid technological change.

The fund may also be subject to risks related to equity securities, REITs, communication services, industrials, information technology, market volatility, passive management, index tracking, liquidity, issuer concentration and non-diversification.

How does RACK fit within VanEck’s thematic ETF lineup?

RACK adds an infrastructure-oriented layer to VanEck’s thematic ETF lineup. Where other strategies may focus on semiconductors, digital assets, robotics or other areas of innovation, RACK targets the physical supply chain enabling AI compute capacity.

In that sense, RACK is designed to capture one of the foundational parts of the AI economy: the companies building, powering, cooling and connecting the data centers that make AI possible.

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Learn more here.

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• Malacca - not Hormuz - is the world's biggest energy chokepoint, and markets haven't priced it yet.
• Hormuz and Malacca are sequential risks, not separate ones — pressure at one amplifies the other.
• Energy security now rewards producers that bypass concentrated shipping corridors.
• Diversification from Malacca concentration is already repricing shale, LNG, renewables, nuclear, and infrastructure.

The Other Strait

The world’s most important strait sits approximately 4,000 nautical miles east-southeast of the Strait of Hormuz, near Singapore, between Malaysia and Indonesia; it has never been closed, never been mined, never been blocked, and most likely never will be. The risk is not closure. It is concentration. We are talking about the other strait, bigger in volume, narrower in width, Malacca. More oil flows through it every day than through Hormuz, and the world is reorganizing itself around that fact whether markets have priced it or not.

In 1453, the Ottoman Empire seized Constantinople and strangled the spice routes that had made Venice the richest city in the world. Pepper, cloves, and nutmeg were the commodities complex of their era, essential and non-substitutable. The response was not negotiation. It was exploration. Vasco da Gama sailed around Africa and Albuquerque pushed further, seizing Malacca with just 17 ships. Five hundred years later. Same passage. Different spices.

Source: IMF Portwatch, VanEck.

The Other Strait Is Bigger

102,500 vessels per year, 3x Hormuz, 7x Suez and Panama, carrying 30% of all traded goods on earth through 2 nautical miles. 1 passage.

More oil transits Malacca every day than any other chokepoint on earth, including Hormuz. In the first half of 2025 that was 23.2 MMbopd, 29% of all global seaborne oil trade. China is the dominant buyer, absorbing 48% of all crude transiting the strait, roughly 7.9 MMbopd, with 75% of its total seaborne crude imports passing through this single corridor. The supply side is equally concentrated: Saudi Arabia, the UAE, Kuwait, and Iraq together account for nearly 60% of all crude transiting the strait.

Energy extends beyond crude. LNG flows averaged approximately 95 bcm/yr, roughly 20% of all global LNG trade. Qatar alone accounts for 28% of that flow, up from 14% in 2020. The strait also carries 23% of all dry bulk cargo. Australian coal. Brazilian soybeans. Southeast Asian rice. All converging on the same channel. No single state controls any of it. What the strait has instead is a concentration so large it is now forcing the world to build around it.

Two Straits, One Supply Chain

Most investors treat Hormuz and Malacca as separate risks. They are sequential nodes on the same supply chain. Approximately 84% of all oil transiting Hormuz is bound for Asian markets, and most of it continues eastward through Malacca. Stress at node one does not replace demand at node two. It amplifies it. When the Red Sea closed, Malacca got busier. Disruption anywhere upstream raises the value of assets that never enter the system at all.

The New Geography of Energy

The producers gaining value share one structural advantage: water on multiple sides. North America spans two oceans. Australia is surrounded by them. Africa faces both the Atlantic and the Indian Ocean. Geography is the routing premium, and it is not priced in yet.

The United States sits at the center of that shift. The only major economy whose domestic energy security does not depend on either strait, the U.S. commands both Atlantic and Pacific buyer relationships. The Permian Basin alone produces over 6 MMbopd of crude alongside substantial volumes of NGLs and natural gas, just inches away from the Gulf of America. Together with the Marcellus and Haynesville basins, it supplies the gas feeding U.S. LNG exports. Those exports hit approximately 154 bcm/yr in 2025, the first country to break that threshold, loading from Gulf Coast terminals with full destination flexibility.

Canada adds dimensions the U.S. cannot yet match. LNG Canada in Kitimat delivers directly into the North Pacific at half the freight cost of a U.S. Gulf Coast cargo through Panama. Alberta’s oil sands, the world’s third largest proven crude reserve, produce heavy sour bitumen that Asian refineries actively seek, moving via the TMX pipeline to Pacific buyers, with over 75% of Canadian heavy crude exports from Vancouver going to Asia-Pacific by late 2025.

Africa sits at the center of the globe, with the Atlantic on one coast and the Indian Ocean on the other. West Africa’s giant legacy fields are regaining a second life through deepwater infill drilling and enhanced recovery, producing light sweet crude that commands a premium in Asian markets. Namibia’s Orange Basin is frontier exploration with world-class discoveries already delineated. Mozambique and Tanzania hold some of the largest untapped gas reserves in the world, with FLNG already delivering to Asian buyers. The political risk premium is real, but so is the resource base.

Australia loads ultra-low sulfur LNG from world-class offshore fields and the highest quality metallurgical coal directly from Pacific ports with zero Hormuz or Malacca exposure.

Russia is the wildcard. Despite sanctions, it became China’s second largest LNG supplier in November 2025, delivering discounted Sakhalin and Arctic volumes directly into the North Pacific, and continues to ship crude, pipeline gas, coal, and grain into Asian markets through routes that bypass both straits.

While unquestionably the dirtiest and most emissions-intense fuel, in a world of energy security no fuel is better positioned than “king coal.” India and China have abundant domestic supply, the seaborne trade routes around it avoid every strait, and other than wood it is the easiest fuel to store and handle. The applications go beyond power. China already produces 80% of its urea from coal, anchoring 40% of global urea output, the foundation of food security for over a billion people. India just approved a $3.9 billion coal gasification scheme in May 2026 to displace imported LNG, urea, ammonia, and methanol, explicitly tied to the Hormuz crisis. Coal does not need a port. It does not need a strait. And it feeds both the electricity grid and the farms of the world’s two largest food economies.

The U.S. wins the Atlantic. The competition for Asia spans energy, metals, food, and the domestic resources that bypass shipping entirely. Renewables and coal do not need a race at all.

The Trades Being Repriced

Bypass producers are the first trade. U.S. shale and Gulf Coast LNG, Canadian Pacific LNG and oil sands crude, Australian LNG and metallurgical coal, West African crude, and East African LNG all reach Asian buyers without touching either strait. Both oil and gas, both light and heavy, both new fields and legacy production. All carry a routing premium that did not exist a decade ago.

Renewables are the second trade, and the acceleration is global. No port. No vessel. No strait. Power is generated where it is consumed. Global capacity additions hit 800 GW in 2025, up 16%, the 23rd consecutive record year. Solar accounted for over three-quarters, wind 20%. China led with nearly 500 GW alone, over 60% of global growth, including 370 GW of solar and 117 GW of wind. The EU added a record 85 GW, with Germany at 17 GW and Spain at 14 GW. India added approximately 56 GW, 50 of which was solar, the fastest renewable build among major markets globally.

Uranium and nuclear is the third trade, broader than the new build story. China has 32 reactors under construction targeting 150 GW by 2035. Japan and South Korea are restarting reactors and approving new builds. The U.S. is extending plant life, with 21 units formally notified to the NRC for renewal in the 2025-2027 window. Small modular reactors are positioned to begin commercial deployment globally in the early 2030s, opening a new asset class entirely. The uranium feeding all of this comes from Kazakhstan (39% of global supply), Canada (24%), and Namibia (12%), none of which depend on Malacca or Hormuz to reach their buyers.

Asian receiving infrastructure is the fourth trade, but not all buyers are equal. Japan and South Korea have mature, flexible regasification networks and can switch suppliers with minimal friction. China has the largest LNG receiving infrastructure in the world and is still building. India is the fastest growing LNG import market globally. Southeast Asia is still constructing that optionality. The binding constraint is not the LNG. It is the terminal.

The Close

Malacca does not need a crisis to matter. It needs to keep doing what it has always done: moving more of the world’s energy through less space than any other corridor on earth. The investment opportunity is not in the disruption. It is in the permanent, compounding reality that concentration at this scale forces diversification, and diversification at this scale creates winners. They are already being built.

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• Companies are remaining private significantly longer.
• Public markets may no longer capture the full innovation cycle.
• AI and abundant private capital are accelerating the trend.
• Investors may be accessing companies later in their growth lifecycle.
• Advisors may increasingly need to rethink innovation exposure.

For decades, public markets represented the primary access point to innovation-driven growth. Investors could participate in the expansion of transformational businesses relatively early in their lifecycle through publicly listed equities. Today, however, many of the world’s fastest-growing companies are staying private significantly longer, allowing a larger share of value creation to occur outside traditional equity indices.

While wealthy industrialist families including the Morgans, Rockefellers, Vanderbilts and Whitneys invested in private companies dating back to the late 19th and early 20th centuries, modern venture capital (VC) can be traced to the period immediately following World War II, with the founding of the American Research and Development Corporation (ARDC). ARDC is considered by many to be the first VC firm in the U.S. Structured as a closed-end fund under the Investment Company Act of 1940, ARDC introduced a permanent capital base funded by wealthy families, university endowments, insurers and investment trusts.

The original purpose of venture capital was to finance the commercialization of innovative, high-risk technologies and emerging companies. In addition to the potential for profit generation, VC was meant to act as a catalyst for job stimulation and political stability. Not surprisingly, VC has played a significant role in funding the technologies behind major industrial and technological revolutions. That influence may be felt more than ever as artificial intelligence (AI) impacts the entire innovation economy, including areas like space, defense, security, semiconductors, manufacturing, energy, finance and healthcare.

Today, there are roughly several thousand active VC firms globally with more than 1,000 in the U.S. and hundreds of billions in annual deal activity. As VC has become more institutionalized, it has also expanded as a category with sub-segments representing different stages of company development, including pre-seed, seed, early-stage, late-stage and growth. This institutionalization notably signals the maturing of an asset class that has attracted record levels of capital as we observe an evolution across public and private markets.

Furthermore, there has been a significant structural shift between public and private markets over the past several decades as private companies continue staying private for longer. As evidenced in the chart below, VC-backed technology companies went from staying private for ~5 years before going public back in the 1980s to ~12 years today, with 2022 and 2024 hitting a peak of 14 years.

VC-Backed Tech IPOs: Volume & Median Age by Decade

Source: Jay R. Ritter, Director – The IPO Initiative; University of Florida. March 17, 2026.

This data raises two critical questions: why are companies staying private for longer, and what does this mean for investors?

Why Companies Are Staying Private Longer

Several factors contribute to “why”, but to oversimplify, the three most meaningful drivers are regulatory, administrative and capital formation.

• Regulatory
  • Section 12(g) of the Securities Exchange Act of 1934: Foundational rule that forced companies to register with the SEC and file public disclosures if they had more than 500 shareholders and $10 million in assets. This may imply that many companies were forced to go public sooner than they would have chosen otherwise.
  • Sarbanes-Oxley (SOX): Enacted in 2002, SOX significantly increased the cost and burden for companies’ securities to trade on listed exchanges. Due to the associated costs being relatively fixed regardless of company size, this disproportionately impacted small to mid-sized companies.
  • The JOBS Act (2012): Interpreted by many as a watershed moment, the biggest impact was revising the shareholder of record threshold up to 2,000 shareholders (or up to 500 non-accredited investors) excluding employees that receive shares via compensation. This change extended the runway for companies to operate privately.
  • SEC’s Regulation D Amendments (2013): SEC lifted the longstanding ban on general solicitation under Rule 506(c) for private placements, unlocking access for private companies to target a larger pool of capital.
• Administrative
  • Administrative, reporting and compliance requirements for publicly traded companies can be overwhelming and prohibitive for less established companies focused on disruptive growth.
  • Publicly traded companies are exposed to daily idiosyncratic market volatility as well as the need to publish and meet quarterly operating guidance, which can impact a management team’s ability to achieve long-term objectives.
  • Staying private can be less daunting, more constructive and provide greater operational flexibility.
• Capital formation
  • Fueled by the regulatory and administrative shifts noted above, the amount of capital made available to private companies has surged over the past couple of decades.
  • As companies stay private longer, they often generate higher operating metrics and market capitalizations, attracting interest from new types of investors as the inherent risk-return profiles change. For example, late-stage VC and growth-equity investors are more likely to step in once a technology company has de-risked its business model and demonstrated certain levels of revenue, growth and potentially even profitability. The same can be true for sovereign wealth and crossover funds.
  • New pools of capital provide a combination of liquidity and fresh capital to further support companies staying private for longer.

What This Means for Investors

The growth of private markets represents one of the most significant structural changes across modern capital markets. Companies are remaining private longer, scaling to larger operating and valuation milestones before pursuing IPOs and increasingly generating meaningful portions of their value appreciation outside traditional public equity markets.

As a result, public market investors may be accessing companies later in their growth lifecycle than in previous decades. The continued expansion of AI and other innovation-driven industries may further reinforce the importance of private capital in financing long-duration growth opportunities.

Public markets continue serving essential roles in liquidity, governance and scalability. However, they may no longer fully capture the entire innovation economy. For investors, the conversation is increasingly shifting from whether innovation is occurring outside public markets to how portfolios thoughtfully evaluate exposure across both public and private market ecosystems.

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As a legally authorized “Territory” of the U.S., Puerto Rico has long been recognized as an important issuer of tax-exempt bonds. The answer lies in the U.S. Constitution, Article IV, Section 3, Clause 2, which allows Congress to create territorial governments, with taxing authority and borrowing authority.

Puerto Rico has been a U.S. territory since the end of the Spanish-American War in 1898. Its constitution wasn’t formally approved by Congress until 1952, but the borrowing authority that came with territorial status has made it one of the most unique, if not important issuers in the municipal bond market over the past 50 years.

The Triple Tax Exemption

The Internal Revenue Code treats territorial obligations similarly to state obligations. But, for Puerto Rico and other territories, that has meant a unique tax treatment for bondholders.

Interest paid on many Puerto Rico bonds is:

• Exempt from federal income tax
• Exempt from state income tax across all 50 states
• Exempt from local taxes

That’s what the market calls the “triple tax exemption,” and it’s the main reason Puerto Rico debt became so deeply embedded in mainland muni portfolios and mutual funds over the years.

Four other U.S. territories share the same triple exemption:

• Guam
• U.S. Virgin Islands
• Northern Mariana Islands
• American Samoa

How Big Is the Territory Muni Market?

Current debt outstanding from Puerto Rico is approximately $37 billion. Add roughly $5 billion from the other four territories and you’re looking at a combined footprint that, while a small slice of the overall muni market, is significant enough to influence index construction and show up in broadly diversified muni funds. Territory bonds in the VanEck muni ETF suite are held primarily in SHYD and HYD, the two high yield muni funds. Commonwealth General Obligation debt carries a BB rating, which keeps it in high yield territory while a small number of territory bonds do qualify as investment grade. But the bulk of territorial exposure sits in the high yield sleeve.

What Investors Should Keep in Mind

Puerto Rico today, as an issuer of municipal bonds, is a different story than it was at peak crisis. It's more accurately viewed as a post-restructuring territorial credit with materially reduced bonded debt. New Congressional initiatives are being unveiled to stimulate investment and incentivize certain industries to return to the island, including the Supply Chain Security and Growth Act and the MMEDS Act (H.R. 3042), which targets pharmaceutical and medical device manufacturing, sectors with deep historical roots in Puerto Rico. That renewed investment focus, combined with the triple exemption that has always defined territory bonds, gives muni investors reason to believe the best of Puerto Rico's story may still be ahead.

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• Semiconductors and AI infrastructure names led the rebound, reasserting leadership after bearing the brunt of the March selloff.
• Micron, Intel, and AMD rallied on accelerating AI infrastructure demand, while AST SpaceMobile lagged following a satellite launch failure and rising competitive pressure in direct-to-device.
• Autonomous freight company Aurora Innovation was added as a new constituent on commercial deployment momentum, while ServiceNow regained investor enthusiasm as the market reassessed the "SaaSmageddon" thesis.

U.S. equity markets staged a powerful and sustained recovery during the recent period between selection dates (April 9, 2026 - May 14, 2026, the “Period”) as a confluence of geopolitical de-escalation, resilient economic data, and renewed enthusiasm for AI-related capital spending drove major indices to fresh all-time highs. The Period opened in the immediate aftermath of a Pakistan-brokered ceasefire between the United States and Iran, announced on April 7, which included a conditional commitment from Tehran to allow safe passage through the Strait of Hormuz. Oil prices fell sharply on the announcement, with Brent crude dropping below $100 per barrel, helping ease the inflation anxiety that had weighed on sentiment through much of the prior Period. While the ceasefire remained fragile throughout, and late-Period headlines saw President Trump describe the truce as being on "life support" after rejecting Iran's latest counterproposal, equity markets proved increasingly willing to look through the geopolitical noise and focus instead on corporate fundamentals and the durability of the expansion.

The rally was led decisively by semiconductors, AI infrastructure, and large-cap technology names, which reasserted leadership after bearing the brunt of the March selloff. A strong first-quarter earnings season provided the fundamental underpinning, with broad upside across the technology complex reinforcing the view that AI-related capital spending remains durable and accelerating. The Philadelphia Semiconductor Index posted extraordinary gains during the Period, while names tied to data centre buildout, networking, and memory benefited from renewed conviction in the multi-year AI investment cycle. Improved market breadth early in the rally, which extended into select cyclicals, small caps, and energy-related equities, gave way to a more concentrated leadership profile by late April and into May, as mega-cap technology increasingly drove index-level returns.

The Federal Reserve added a layer of complexity at its April 29 meeting, holding the target range for the federal funds rate at 3.50 to 3.75 percent in what was likely Chair Powell's final meeting at the helm. The vote featured four dissents, the most since 1992, with one member favoring a rate cut and three others opposing the inclusion of an easing bias in the statement, underscoring the degree of internal division over the appropriate policy stance. On May 13, Kevin Warsh was confirmed by the Senate as the next Federal Reserve Chair, adding a further dimension to the evolving policy outlook.

Against this backdrop, the S&P 500 gained 10.0%, and the Nasdaq Composite rallied 16.8% during the Period, with both indices closing at all-time highs. The BUZZ NextGen AI US Sentiment Leaders Index (the "BUZZ Index") materially outperformed, gaining 26.3%, as its higher-beta, sentiment-sensitive constituents participated disproportionately in the rebound. This represented a sharp reversal of the prior Period's underperformance, when many of the same holdings had been among the hardest hit during the March liquidation phase. The Period therefore reflected not simply a broad market recovery, but a decisive re-rating of growth-oriented and AI-linked leadership. While the rally ended with equities at elevated levels and investor confidence substantially restored, the underlying macro backdrop, including unresolved geopolitical risk, elevated energy-driven inflation, and a Federal Reserve constrained by firm price data, suggests that the path forward may prove less linear than the Period's headline returns imply.

The BUZZ Index returned 17.35% during the month of April compared to a return of 10.49% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index lags the S&P 500 with returns of 4.19% and 5.70%, respectively, as of the end of April.

Semiconductors Pace BUZZ Gains as AI Infrastructure Theme Accelerates

Micron Technology, Inc. (NASDAQ: MU), Intel Corporation (NASDAQ: INTC), and Advanced Micro Devices, Inc. (NASDAQ: AMD) were among the leading contributors to BUZZ Index performance during the Period, rising 84.1%, 87.8%, and 90.0%, respectively, as investors rotated aggressively back into semiconductor names viewed as direct beneficiaries of the accelerating AI infrastructure buildout. Intel's advance was supported by several company-specific developments, including its agreement to repurchase Apollo's stake in its Ireland fabrication facility, its participation in Elon Musk's Terafab initiative, and an expanded partnership with Google focused on AI and cloud infrastructure. Micron benefited from surging demand for high-bandwidth memory, which has become the critical bottleneck in AI data centre deployments, with industry supply constraints supporting pricing power and fueling enthusiasm around what many view as a multi-year memory supercycle. AMD participated strongly as confidence improved around the durability of AI-related capital spending and the company's positioning as a credible scaled alternative in high-performance computing.

Applied Digital Corporation (NASDAQ: APLD) was also a notable contributor during the Period, rising 82.7%. The company reported fiscal third-quarter revenue up 139 percent year over year, driven by its first fully operational high-performance computing data centre, and subsequently announced a 15-year lease with a new investment-grade U.S. hyperscaler representing approximately $7.5 billion in contracted value. These developments reinforced the view that Applied Digital is successfully scaling from a niche hosting provider into a material participant in the physical layer of the AI buildout.

Top BUZZ Index Contributors: April 9, 2026 – May 14, 2026

Source: BUZZ Holdings ULC, Bloomberg. 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.

AST SpaceMobile Leads BUZZ Detractors as Execution Risks Mount

AST SpaceMobile, Inc. (NASDAQ: ASTS) was the leading detractor from BUZZ Index performance during the Period, declining 13.94%. The stock faced a series of setbacks that collectively weighed on investor confidence in the company’s near-term execution. In mid-April, Blue Origin placed AST’s BlueBird 7 satellite into an incorrect orbit during launch, forcing the company to write off the asset and raising questions about the feasibility of its target of 45 satellites in orbit by year-end. The launch failure was compounded by significant insider selling, including large dispositions by Rakuten, and growing competitive concerns following Amazon’s acquisition of Globalstar, which signalled the emergence of a well-capitalised third entrant in the direct-to-device satellite market alongside SpaceX. Late in the Period, AST reported first-quarter results that missed expectations by a wide margin, sending shares sharply lower in after-hours trading. While management reaffirmed its full-year revenue guidance and highlighted progress on its vertically integrated manufacturing platform, the combination of execution risk, competitive pressure, and a still-nascent revenue base may have left investors less willing to extend the benefit of the doubt in what was otherwise a strongly risk-on environment.

Bottom BUZZ Index Contributors: April 9, 2026 – May 14, 2026

Source: BUZZ Holdings ULC, Bloomberg. 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.

BUZZ Index May 2026 Rebalance Highlights

Aurora Innovation, Inc.

Aurora Innovation (NASDAQ: AUR) is an autonomous driving technology company focused on trucking and freight transportation. Founded in 2017, the company was established by several prominent figures in the autonomous vehicle industry, including CEO Chris Urmson, one of the original leaders of Google’s self-driving technology division. AUR went public through a merger with the SPAC Reinvent Technology Partners Y in 2021. After declining as much as 90% from its highs, shares have rallied more than 700% since 2023. While the widespread adoption of autonomous passenger vehicles has progressed more slowly than many initially expected, investor optimism has increasingly shifted toward freight transportation applications, where highway driving environments are generally more structured and operationally simpler. Earlier this month, Aurora announced major partnerships with Volvo and McLane, alongside the expansion of its autonomous freight corridor between Dallas and Houston to include Oklahoma City. The developments reinforced the view that Aurora is beginning to transition beyond testing and research into meaningful commercial deployment. Investor sentiment rose sharply following the announcements, and the company’s shares have doubled since the start of April. This month, AUR enters the BUZZ Index for the first time with a 0.5% weight.

ServiceNow, Inc.

Earlier this year, a sharp selloff across software-as-a-service companies gave rise to the term “SaaSmageddon.” Investors grew increasingly concerned that agentic AI could replicate many of the workflows and pipelines underpinning traditional SaaS business models, triggering steep declines in shares of companies such as Salesforce (NYSE: CRM), Adobe (NASDAQ: ADBE), and ServiceNow (NYSE: NOW). Much of the functionality delivered through large human workforces was suddenly being viewed as vulnerable to replacement by AI agents. On April 22, ServiceNow reported Q1 earnings. While shares initially declined following the release, the company delivered strong revenue growth and raised guidance, helping to stabilize sentiment around the name. Since then, investor sentiment towards NOW has been steadily increasing, as the market appears to be reassessing the probability of the more extreme “doomsday” scenario. Instead, investors may be increasingly betting that leading SaaS platforms may successfully integrate and monetize AI capabilities rather than be displaced by them. This month, ServiceNow experienced one of the largest increases in weight within the BUZZ Index, rising from a 0.9% weight in April to 2.85% in May.

For more on rebalancing results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

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Key Takeaways

• Spot rally without the leverage: bitcoin (BTC) recovered +11.8% m/m to ~$78,272, but options open interest stayed flat and put premiums collapsed -51%, indicating the rally is spot-driven, not levered.
• Hashrate drawdown sets a record: the 30-day MA hashrate sits -13.2% below its November 11, 2025 peak at 964 EH/s, with 187 days elapsed, the longest and deepest sustained decline in bitcoin’s industrial mining era.
• US public miners exit; sovereigns inherit: the 11 largest US public miners shed ~7 EH/s in Q1 2026 as power capacity moves to AI hyperscalers under 10-to-15-year leases. Government-owned stranded hydro and gas assets become the natural successor.

Funding Rates Hold Tepidly Positive

Bitcoin price action over the past 30 days stabilized after a deep prior-month drawdown, with the 30-day moving-average (MA) price recovering to ~$78,272 (+11.8% m/m) and the spot close on May 14 at $81,394. Despite the price recovery, perpetual-futures sentiment remains outright cautious. The 30-day moving average of the annualized basis has slipped to -0.45%, down from 1.27% a month ago and well below the 3.16% reading from a year ago. The current 30-day MA sits in the 15th percentile of all observations since November 2020. The 7-day moving average sits higher at  3.13%, a rebound from April's negative territory but still well short of levels typically associated with bullish positioning.

Options Positioning: Hedging Unwinds as Vol Collapses to Historic Lows

Bitcoin Put Premiums Collapsed -51% Month-Over-Month as Hedging Demand Unwound

Source: VanEck Research, Glassnode as of 5/18/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

The options complex rotated sharply over the last 30 days as hedging demand collapsed amid the price recovery. Put premiums paid dropped -51% m/m to $281.8M, while call buying fell a far more modest -8%. The Call/Put premium ratio swung from 0.82 last month to 1.54, signaling a decisive rotation out of downside protection and into upside positioning. Despite the move, the Call/Put ratio is arguably neutral and sits at only the 46th all-time percentile.

Options open interest has remained flat as BTC recovered, confirming the rally is spot-driven rather than leveraged-options-driven. Total options OI grew +0.8% m/m to $33.0B and sits at the 18th percentile of the trailing year versus a 1-year average of $40.3B.

Implied volatility (IV) is historically cheap across the 1-month options curve. The 1-month Call IV of 37% was down -8.2 percentage points m/m and now sits at the 3rd all-time percentile. Meanwhile, 1-month Put IV at 44% is -12.2 percentage points m/m and sits at the 12th percentile. IV Skew, or the Put/Call IV differential, remains defensive despite the IV collapse. The 1-month put/call skew fell to +6.9 percentage points from +10.9 percentage points a month earlier, sitting at the 72nd all-time percentile. This suggests that BTC puts are still richer than calls on a relative basis. Traders are not paying up for downside protection using puts, but the fear bid is structurally present.

1-Month Options Snapshot: Volatility Sits at Multi-Year Lows

Source: VanEck Research, Glassnode as of 5/14/2026. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Onchain Activity and Network Usage

Network throughput has accelerated over the past 30 days. Daily transactions averaged ~590k, up +9.2% m/m and +46.4% y/y, sitting at the 99th percentile of all-time history and the 99.7th percentile of the trailing year, running about +33% above the trailing 12-month average. Daily active addresses (644.6k) and new addresses (287.5k) ticked up +4.7% and +2.5% m/m respectively but remain well below year-ago levels (-13.2% and -7.5% y/y) and in the 20th and 12th percentiles, indicating throughput is being driven by repeat users rather than new entrants. Daily inscriptions (49.8k) faded another -5.7% m/m and are -47.6% y/y, continuing the trend of ordinal-driven activity declining on the network.

Transfer volume in BTC terms ran at 782k/day (+13.7% m/m); in USD terms ~$61.1B/day (+26.5% m/m, -0.8% y/y), with the price recovery doing most of the dollar-denominated work. The share of active supply in the last 180 days slipped -160 bps m/m to 28.4% (56th percentile), echoing April’s holder dynamics. Holders appear to be growing more dormant even as price recovers. The percentage of supply in profit climbed to 78.9% (+5.7% m/m, 24th percentile), and the unrealized P/L ratio rose to 0.307 (+37.0% m/m, -41.9% y/y, 23rd percentile).

Miner revenue averaged ~$35.4M/day (+12.6% m/m, -17.5% y/y), and miner-to-exchange flows in USD ran at ~$10.5M/day (+9.5% m/m, -18% y/y). BTC dominance closed the period at 59.9% (+254 bps m/m, 67th percentile), a partial reversal of the altcoin rotation earlier in the quarter.

Long-Term Holder Behavior

The cohort picture has shifted decisively toward the long end and the youngest long-term cohorts. The April note flagged elevated transfer activity among 5y-7y, 7y-10y, and 10y+ holders while younger long-term cohorts pared back. Over the last 30 days the long-end story has intensified and broadened: the 10y+ cohort moved 51.3k BTC (+30% m/m), placing it in the 89th percentile of all rolling 30-day windows over the past year and the 92nd over the past two years.

The 1y-2y and 2y-3y cohorts sit at the 84th-87th percentiles on both bases, with 2y-3y up +132% m/m. The 7y-10y cohort prints a 58th percentile over the past year. The genuine quiet spots are 3y-5y and the 5y-7r cohorts which made transfer activity in the 20th and 24th percentiles over the past year.

Despite the elevated transfer activity amongst longer term holders, the 5y-7y, 7y-10y, and 10y+ age groups’ total token balances sit at the 48th, 93rd and 99th percentiles over the past 4 years. Likewise, not all spent volume represents selling: some flows reflect migrations to quantum-resistant addresses, digital asset treasury (DAT) contributions, or routine wallet maintenance. However, the younger cohorts of long-term holders have seen substantial churn. The 1y-2y, 2y-3y, and 3y-5y maturity brackets holdings sit at the 42nd, 10th, and 2nd percentiles over the past 4 years!

Realized P/L confirms the easing of distribution pressure. The 30-day average net realized P/L flipped from -$139M/day in the prior 30-day window to +$26M/day in the most recent window, indicating that on net, coins moving onchain are no longer locking in losses. From April 15 – May 15, 19 out of the 30 days saw hodlers realized positive profit on their Bitcoin transfers.

Long-Term Holder Spent Percentiles (Last 30 Days, Share of Supply Spent):

Oldest LTH Cohorts Reactivate, Oldest Quiet Down

Source: VanEck Research, Glassnode as of 5/19/2026. 'Last 30d share' = sum of supply spent by cohort over trailing 30 days as a fraction of cohort supply. Not all spent volume represents selling. Past performance is not a guarantee of future results.

Mining Dynamics: Hash-Rate Drawdown Signal Still Active

Bitcoin Hashrate Suffers Longest Sustained Drawdown in Industrial Mining Era

Source: VanEck Research, Glassnode as of 5/18/2026.

The hash-rate drawdown that began in mid-November is no longer a blip; now represents the longest and deepest sustained decline in Bitcoin's industrial mining era. The 30-day MA hashrate sits at 964 EH/s, -13.2% below the 1,110 EH/s peak set November 11, 2025, a drawdown that's already run 187 days with a peak intra-episode trough of -14.5%. Momentum readings reinforce the picture: the 30-day change in the hash-rate MA sits in the 19th percentile of all rolling 30-day moves, and the 90-day change in the 16th percentile. In Bitcoin's history, contractions of this magnitude are uncommon. Mining difficulty tells the same story, since it tracks hashrate. Currently, its 30-day change sits in the 10th percentile, the 90-day change in the 8th, and difficulty itself is -12.7% below its November 27, 2025 high.

US Public Bitcoin Miner Hashrate: Q4 2025 vs Q1 2026

Source: VanEck Research, 8-K / 10-K quarterly production disclosures, Q4 2025 & Q1 2026 earnings releases as of 5/18/2026.

The US public miner cohort is undergoing a structural reorientation that is reshaping the composition of global Bitcoin hashrate. The logic driving the pivot is financially compelling. AI and high-performance computing (HPC) data center infrastructure commands valuations per megawatt that are multiples of what Bitcoin mining has historically attracted, and that gap has widened sharply. The gross valuation afforded per MW of AI capacity has grown roughly 3x since the summer of 2025, creating a powerful incentive for any miner sitting on contracted power to reconsider how that megawatt is best monetized.

The trend became impossible to ignore in Q1 2026. Across the 11 largest publicly traded US Bitcoin miners, aggregate installed hashrate declined by roughly 7 EH/s between Q4 2025 and Q1 2026, as companies began physically decommissioning mining fleets and repurposing substations, cooling systems, and data hall layouts for GPU workloads. This is not a temporary curtailment but a full pivot away from Bitcoin mining that permanently removes these power sites from the Bitcoin network.

The exits are coming in waves and on different timelines. CORZ will be a near-pure-play AI infrastructure company by early 2027, having already reduced its mining footprint to one or two sites by year-end 2026. CIFR is running its last remaining Odessa mine to exploit a favorable fixed-price power purchase agreement (PPA), with CEO Tyler Page citing the end of July 2027 as an outside date for full exit. WULF has told investors it will be out of Bitcoin mining by the next halving, roughly April 2028. IREN and KEEL have both committed to multi-year exits without specifying hard dates, though KEEL is arguably the furthest along, having already sold its Latin American Bitcoin operations, rebranded, redomiciled to the US, and halted all new mining capital expenditure.

What makes this wave distinct from prior cycles of miner capitulation is the permanence. Miners are not switching off rigs because Bitcoin economics are temporarily unattractive. They are signing 10-to-15-year leases with investment-grade hyperscalers, locking in contracted revenue streams that dwarf anything the mining business could offer, and structurally committing the underlying power capacity to AI for a generation.

US Public Bitcoin Miners Shed ~7 EH/s in Q1 2026 as AI Pivot Accelerates

Equity Value Creation ($mm/MW)

Source: VanEck Research, Corporate disclosures, as of 5/18/2026.

We believe that the most logical successor to the departing corporate fleet is the sovereign miner. Nation-states face no quarterly earnings pressure, no institutional shareholder base demanding an AI multiple, and no cost of capital in the conventional sense. Government-owned stranded hydro or gas assets should continue to prove appealing as Bitcoin mining sites.

Russia is a significant example, running an estimated 13-17% of global hashrate anchored by Siberian hydro and natural gas, though rising domestic energy costs have stalled its hashrate growth since 2025. BitRiver operates with implicit state backing, and Moscow formalized mining as a legally taxable activity in 2024, but grid power has climbed above $0.06/kWh in many regions, squeezing margins and pushing some operators to relocate abroad.

The Gulf states represent the most consequential emerging vector, with Saudi Arabia sitting on roughly 1.5 billion cubic feet per day of flared Aramco gas and the UAE already hosting licensed sovereign-backed programs through Abu Dhabi Global Market (ADGM). Bhutan accumulated over 13,000 BTC against Himalayan hydro surplus through its sovereign wealth fund Druk Holding, representing the purest early proof of concept for state-directed mining. Holdings have since dropped to roughly 3,121 BTC, a -76% reduction in 18 months, with onchain data showing no significant new mining inflows for over a year, though officials deny any sales. Ethiopia's sovereign wealth fund signed a $250 million memorandum of understanding (MOU) with Hong Kong-based West Data Group in February 2024 to mine against GERD hydro overflow, with foreign currency generation the explicit motivation.

These are countries with stranded energy surplus that would be best monetized by Bitcoin mining.

"This motivation should prove durable across Bitcoin price cycles in a way corporate mining economics are not. As US public miners decommission fleets to build AI data centers, older-generation ASICs will flow into distressed secondary markets where sovereign and state-affiliated buyers with cheap power and long time horizons are the natural acquirers. We believe that the hardware will find the energy."

Frequently Asked Questions

Why is bitcoin’s hashrate falling in 2026?

The 30-day moving average hashrate has been in drawdown for 187 days, marking the longest and deepest sustained decline since bitcoin reached industrial scale. The proximate cause is the AI pivot among US public miners, which shed roughly 7 EH/s of bitcoin hashrate in Q1 2026 as they redirected power capacity to high-performance computing tenants under 10-to-15-year leases. Difficulty has reset -12.7% over the same period, partially offsetting the network impact.

Which sovereign nations are mining bitcoin?

Russia operates an estimated 13-17% of global hashrate, anchored by Siberian hydro and natural gas. Bhutan, through its sovereign wealth fund Druk Holding, accumulated over 13,000 BTC against Himalayan hydro surplus, though holdings have since drawn down to roughly 3,954 BTC. The Gulf states are the most consequential emerging vector, with Saudi Arabia sitting on ~1.5 billion cubic feet per day of flared Aramco gas and the UAE hosting licensed sovereign-backed programs through ADGM. Ethiopia’s sovereign wealth fund signed a $250 million MOU in February 2024 to mine against GERD hydro overflow.

What does declining hashrate mean for bitcoin’s price?

Historically, sustained hashrate drawdowns have shown no consistent directional relationship with spot prices. The current setup is structurally distinct: capacity is not being switched off in response to weak economics but redirected to AI tenants under long-term contracts, which removes that capacity from bitcoin mining for a decade or longer. In the near term, the spot recovery to ~$78,272 (+11.8% m/m) has occurred alongside the hashrate drawdown, suggesting price is being driven by demand-side factors independent of mining capacity.

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• Indian businesses have grown their underlying net worth consistently for two decades, through every crisis and market cycle.
• India has always traded at a premium to broader emerging markets and has earned it. Today that premium is near a 20-year low.
• The risks are real but well understood, and a decade of policy reform has reduced India’s sensitivity to the most significant one.

What 20 Years of Corporate Book Value Growth Tell Us About Investing in India Today

There are two ways to own India.

The first is a short-term bet: that India will outperform China, EM, or the S&P 500 over the next year or two. The second is a long-term position in the growth of Indian corporate book value. These are different investments. The first requires a prediction. The second requires patience. This piece is about the second.

Before going further, two terms matter.

Compounding is what happens when a business reinvests what it earns. Each year’s gains build on the previous year’s. Over time, small consistent growth rates produce large results. A business growing book value at 9% per year doubles it in roughly eight years. Doubles it again in eight more.

Book value per share is what a company owns minus what it owes, divided by shares outstanding. Think of it as the accumulated net worth of the business. It grows when a company earns more than it spends. It is a more stable measure than stock price, which moves daily with investor sentiment. Price tells you what the market thinks a business is worth today. Book value tells you what the business has built over time.

Unlike price performance, looking at book value growth strips sentiment out of the picture. Over the past 20 years, the MSCI India Index has grown book value per share at 9.4% per year in USD terms, on a total return basis including dividend reinvestment. That is the number this piece is built around.

Short-term traders and long-term investors are asking different questions.

When India underperforms, as it has over the past year, the instinct is to ask whether it will catch up. Will India beat China next year? Will it outperform broader EM? These are reasonable questions for a short-term trader. They are the wrong questions for a long-term investor.

India’s recent lag has a few straightforward explanations. Money rotated into China after its government signaled economic stimulus. India’s own market had gotten expensive and corrected. Near-term earnings growth slowed. South Korea and Taiwan performed well, pulling flows in their direction. None of this changed what the underlying Indian businesses were doing. They kept building book value. The economy kept growing.

India’s difficult periods do not look like collapse. They look like standing still while other markets run. The investment case is in two decades of steady book value growth. That case has not changed.

"The first requires a prediction. The second requires patience."

20 years of book value growth: the engine in numbers.

The case for India does not rest on a prediction. It rests on a record.

Over 20 years, the book value per share of the MSCI India Index, measured on a total return basis, has grown at 9.4% per year in USD terms. The same measure for the MSCI Emerging Markets Index has grown at 3.6% per year over the same period. India’s advantage: nearly 6 percentage points, every year, for 20 years.

Over those same 20 years, the MSCI India Index delivered a total return of +261%. Here is where that return came from. Book value per share grew from $57 to $666, a gain of nearly 5x. At the same time, the price-to-book ratio fell from 5.57x to 3.36x. Investors were paying 40% less per dollar of book value at the end of the period than at the start. Those two forces multiplied together produce the +261% total return. Book value growth delivered above-market returns despite a significant while valuations became more attractive.

The return did not come from the market becoming more optimistic about India. It came from Indian businesses building book value for two decades while investors actually became less willing to pay for it. That is the durability argument. It does not require sentiment to improve. It requires only that the businesses keep doing what they have done.

Table 1: MSCI India vs MSCI EM, Key Metrics

Source: Bloomberg, as of April 30, 2026. MSCI India Index and MSCI Emerging Markets Index, USD. April 28, 2006 to April 30, 2026 (20 years, 241 monthly observations). Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Past performance is not indicative of future results. See footnote 1.

Valuation: India has rarely been this cheap relative to EM.

India’s investment case above does not depend on India outperforming EM. But when you buy matters for any long-term investment, and on that measure the current entry point is worth examining. On the surface, India at 3.36x book looks expensive next to EM at 2.40x book. The raw number is the wrong place to start.

The right question is where each market stands relative to its own history. India at 3.36x sits at the 55th percentile of its own 20-year range, slightly above its own historical average. That is a fair price for what India has historically delivered. EM at 2.40x sits at the 89th percentile of its own 20-year range, close to its most expensive level in two decades. India is cheaper relative to its own history than EM is.

There is also a quality dimension. India has always traded at a premium to EM, and it has earned that premium by growing book value at more than twice EM’s rate for 20 years. The right way to measure that premium is as a ratio: India’s P/B divided by EM’s P/B. Today that ratio stands at 1.40x. The 20-year mean is 1.93x and the median is 1.91x. The current reading is more than one standard deviation below the 20-year mean, which sits at 1.65x. In plain terms, investors are paying significantly less of a premium for India’s superior growth today than they have on average over the past two decades. The question is not whether India deserves a premium. It does. The question is whether today’s premium is fair. At 1.40x, it is not just fair. It is cheap.

The geopolitical pressure that created this entry point was temporary. The valuation gap it opened is real.

Figure 1: India/EM P/B Premium, 20-Year Range

MSCI India vs MSCI EM – Price-to-Book Ratio, 20-Year History

India P/B Premium Over EM – At 13-Year Low

Source: Bloomberg, as of April 30, 2026. 241 monthly observations, April 28, 2006 to April 30, 2026. See footnote 2.

The war and oil: a real risk, a reformed system.

Oil price sensitivity is a recurring concern for India investors, and the current geopolitical environment in the Middle East warrants a direct response. The risk is real. India imports approximately 88-89% of its crude, spending roughly $161 billion on petroleum imports in FY2024-25. The sensitivity is meaningful:

Source: S&P Global Ratings, April 2026; Reserve Bank of India, Mint Street Memo No. 17. Row 2 derived from per-barrel sensitivities in cited sources. Row 4 based on Ministry of Finance subsidy data; see footnote 4. For illustrative purposes only. Not intended as a forecast or prediction of future results.

What most investors miss is that India’s relationship with oil has changed. Before 2014, the Indian government fixed the retail price of fuel. When oil prices rose globally, the government made up the difference, which blew a hole in the budget and fed through into inflation. At the peak, those subsidies cost $24.6 billion a year. That system no longer exists. Petrol prices were deregulated in 2010, diesel in 2014. Prices now adjust daily. By 2017, subsidies had fallen to $1.2 billion. When oil prices spike today, the government adjusts fuel taxes rather than writing subsidy checks. The shock is absorbed at the pump, not amplified through the budget.

On sourcing, India has diversified its crude basket from 27 countries to over 40. Russian crude, following sanctions-driven reductions from a peak above 35% of imports, now accounts for roughly 25%. The import basket has shifted before and will shift again in response to global supply conditions. India’s posture is pragmatic, not dependent on any single source.

Crude imports as a share of GDP have fallen from 8.5% in 2012 to around 4.8% today, not because India imports less oil, but because the services economy, now over 55% of GDP, has grown faster than energy consumption. Physical import dependency remains high at 88.5% and is projected to rise. The resilience argument is not that India needs less oil. It is that the same barrel does less economic damage than it did a decade ago.

How to access the thesis with VanEck

Investors looking to access the India book value growth story have multiple options. Passive and active strategies are both available, spanning broad market exposure, systematic growth-at-a-reasonable-price approaches, high-conviction active management, and a thematic sleeve focused on India’s digital economy. The right combination depends on how directly an investor wants to express the argument made in this piece.

Fund data as of April 2026. Past performance not indicative of future results. Not intended as a recommendation to buy or sell any securities referenced herein.

The investment case.

The case for India today does not require India to beat any other market. It requires only that Indian companies keep growing their book value at or near the rate they have sustained for 20 years, and that buying that growth at today’s price produces strong returns over the next five to ten years.

We believe that both conditions are currently met. The 20-year book value growth record is intact. India’s sensitivity to oil price shocks has been reduced by a decade of policy reform. And the price being paid today, at the 3rd percentile of India’s historical premium over EM, is, in our view, one of the most attractive entry points in 20 years.

What happens in Indian equities over the next 12 months is unknown. The 20-year record of book value growth is not.

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• High earners in the top federal tax brackets stand to benefit most from high yield munis, where tax-equivalent yields can significantly exceed comparable taxable bonds.
• Retirees drawing income from multiple sources may find that tax-exempt municipal bond income helps manage their overall tax burden more efficiently.
• The advantage of high yield munis is greatest in taxable brokerage accounts; holding them in tax-deferred accounts like IRAs or 401(k)s generally negates the federal tax exemption.

Who Benefits Most from High Yield Municipal Bonds?

For investors in the right tax situation, high yield munis can deliver meaningfully more after-tax income than their taxable counterparts. The investors who tend to benefit most include high earners facing elevated federal and state tax rates, retirees managing multiple taxable income streams, and anyone allocating within a taxable brokerage account. Understanding where you fit and where you hold your bonds is essential to capturing the full advantage.

High Earners: How High Yield Municipal Bonds Help You Keep More of What You Earn

For households in the 32%, 35%, or 37% federal tax brackets, the math on municipal bonds is striking. The key concept is tax-equivalent yield: the return a taxable bond would need to offer to match the after-tax income of a tax-exempt muni. Divide the muni yield by one minus your marginal tax rate, and the gap becomes clear.

In the current environment, high yield munis are offering yields in the 4% to 5% range. For an investor in the 37% bracket, a 4.5% tax-exempt yield is equivalent to roughly 7.1% on a taxable bond, exceeding what most investment-grade corporates pay today. Add the 3.8% Net Investment Income Tax surcharge for higher-income filers, and the effective advantage grows further. For residents of high-tax states like California or New York, in-state munis can push the tax-equivalent yield toward 9%.

Retirees: Can High Yield Municipal Bonds Improve Tax-Efficient Income?

Retirement doesn’t always mean a lower tax bracket. Combined income from Social Security, pensions, RMDs, and portfolio withdrawals can push retirees into elevated brackets, and every additional dollar of taxable income can affect how much of Social Security itself gets taxed.

Municipal bond interest is generally excluded from federal taxable income and does not itself constitute taxable Social Security income; however, it may be included in the provisional income calculation used to determine the taxability of your Social Security benefits and in Modified Adjusted Gross Income for Income-Related Monthly Adjustment Amount (IRMAA) purposes. Consult a tax advisor for guidance specific to your situation. For retirees seeking steady, tax-efficient cash flow, high yield munis can offer monthly distributions that aren’t eroded by federal taxes. That said, the added credit risk relative to investment-grade bonds is worth weighing carefully.

Taxable Account Investors: Why High Yield Munis Offer the Largest Advantage

The muni tax benefit is realized in full only in a taxable brokerage account, where interest income flows directly to the investor free of federal income tax, and potentially free of state and local taxes as well. From an asset location standpoint, municipal bonds belong in the taxable sleeve of a diversified portfolio, while taxable bonds may be better suited for IRAs and 401(k)s.

For high yield munis, the advantage is even more pronounced. The higher coupon payments typical of below-investment-grade or crossover-rated munis translate into more tax-exempt income each month, a level of after-tax yield that can be difficult to replicate with taxable alternatives.

What About High Yield Municipal Bonds in Tax-Deferred Accounts?

Placing munis in a traditional IRA or 401(k) generally doesn’t make sense. Inside a tax-deferred account, all income is taxed as ordinary income upon withdrawal, neutralizing the muni exemption entirely. Worse, because munis typically offer lower nominal yields than comparable taxable bonds, you may earn less income with no offsetting tax benefit.

The same logic applies to Roth IRAs: since withdrawals are already tax-free, the muni exemption is redundant. Roth space is typically better used for higher-yielding taxable investments that can compound free of future taxation.

High Yield vs. Investment Grade Municipal Bonds: Which Is Right for You?

Investment-grade munis, rated BBB or above, offer lower yields with lower default risk and more price stability. High yield munis compensate for added credit risk with higher coupon payments, spanning sectors like hospitals, education, transportation, and industrial development.

The trade-off is real: higher default rates, more volatility in economic downturns, and lower liquidity. But for investors who can tolerate the risk and benefit from the tax exemption, high yield munis can offer a compelling income stream, especially when diversified across issuers, sectors, and geographies.

How to Access High Yield Municipal Bond Exposure with HYD

The VanEck High Yield Muni ETF (HYD) seeks to replicate the performance of the ICE Broad High Yield Crossover Municipal Index, covering the U.S. dollar-denominated high yield long-term tax-exempt bond market. With broad diversification across sectors and geographies, HYD provides access to a market segment that can be difficult for individual investors to navigate on their own.

For tax-sensitive investors, whether high earners, retirees, or anyone allocating within a taxable account, HYD may serve as an efficient building block for the fixed-income portion of a portfolio.

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• Tax-equivalent yield adjusts a muni bond’s tax-free income to show what a taxable bond would need to yield to match it after taxes.
• For investors in a high federal tax bracket, high yield munis can offer meaningfully higher after-tax income than corporate high yield.
• Triple tax-free status in certain states pushes the advantage even further, making high yield munis a compelling income tool for tax-sensitive portfolios.

What Is Tax-Equivalent Yield and Why Does It Matter?

Tax-equivalent yield (TEY) is the pre-tax yield a taxable bond would need to offer in order to match the after-tax income of a tax-exempt municipal bond. It’s the standard way to compare munis and taxable bonds on a level playing field.

This matters because a muni bond yielding 4% isn’t directly comparable to a corporate bond yielding 5%. Once you account for the taxes owed on the corporate bond’s income, the muni may actually deliver more cash to the investor. TEY makes that comparison explicit.

How Is Tax-Equivalent Yield Calculated?

The formula is straightforward: divide the muni yield by (1 minus the investor’s marginal tax rate). For example, a 4% muni yield for an investor in the 32% federal bracket produces a TEY of 5.88%. That means a taxable bond would need to yield at least 5.88% to deliver the same after-tax income.

The higher the tax bracket, the more valuable the tax exemption becomes, and the higher the TEY climbs.

Tax-Equivalent Yield by Federal Tax Bracket

Assumes a 4% muni yield for illustrative purposes. TEY = Muni Yield / (1 - Federal Tax Rate).

How Do High Yield Munis Push Tax-Equivalent Yield Even Higher?

High yield munis start with a higher base yield than investment grade munis, which amplifies the TEY advantage. A high yield muni yielding 5% in the 35% bracket produces a TEY of 7.69%, a level that many corporate high yield bonds struggle to match consistently.

Because the tax exemption applies to the full coupon, the absolute dollar benefit of tax-free status grows as the yield increases. This makes the high yield segment of the muni market particularly attractive for income-focused investors in higher brackets.

Why Corporate High Yield Often Loses to Munis on an After-Tax Basis

Corporate high yield bonds may offer higher nominal yields, but that income is fully taxable at federal (and often state) rates. For an investor in the 35% bracket, a 7% corporate yield shrinks to roughly 4.55% after federal taxes alone. A high yield muni yielding 5% keeps the full 5%.

This after-tax gap is why many advisors and high-net-worth investors increasingly view high yield munis as a core income allocation rather than a niche holding.

What Is Triple Tax-Free Status and Who Benefits Most?

Municipal bonds issued within an investor’s home state are often exempt from federal, state, and local income taxes. This triple tax-free status can push TEY significantly higher, especially in high-tax states like California, New York, and New Jersey.

For a New York City resident in the top federal bracket who also faces state and city income taxes, the combined marginal rate can exceed 50%. In that scenario, a 4% triple tax-free muni has a TEY above 8%, making it extremely difficult for taxable alternatives to compete.

How to Access High Yield Muni Exposure

The VanEck High Yield Muni ETF (HYD) tracks the ICE Broad High Yield Crossover Municipal Index, providing broad exposure to the U.S. dollar-denominated high yield, long-term, tax-exempt municipal bond market. For investors seeking a shorter-duration option, the VanEck Short High Yield Muni ETF (SHYD) focuses on the 1 to 12 year maturity range within the same high yield muni universe.

Both funds offer a straightforward way to access the tax-equivalent yield advantage of high yield munis within a diversified, index-based framework.

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• The Moat Index outperformed through February before a sharp March–May selloff erased its lead.
• Nike, Zoetis, Clorox, Estée Lauder, and GE HealthCare drove most of the underperformance.
• Despite recent weakness, all five companies retain Morningstar wide economic moat ratings.
• Following prior periods of underperformance, the Moat Index historically rebounded within 1–2 years.
• The Moat Index now trades at a 22% discount to fair value vs S&P 500 indexes.

Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Index returns do not reflect management fees, transaction costs, expenses or taxes, which would reduce returns.

YTD Performance: A Tale of Two Halves

Through the end of February 2026, the Morningstar Wide Moat Focus Index (the "Moat Index") was outperforming the S&P 500 Index. The Moat Index gained 3.38% through February while the S&P 500 was mostly flat for the year (+0.68%), a gap that reflected the kind of quality-at-a-discount positioning the moat strategy is designed to deliver. Then March arrived and the picture reversed.

From March 1 through May 15, 2026, the Moat Index declined approximately -7.06%, while the S&P 500 Index gained 7.96%, a relative gap of 15 percentage points in a matter of weeks. Notably, the S&P 500 Equal Weighted Index also posted negative returns in that period (-1.24%) after leading the market capitalization-weighted S&P 500 Index for the first four months of 2026, it now sits about 3.0% behind.

With the Moat Index in negative territory for 2026 while both the S&P 500 Index and S&P 500 Equal Weighted Index remain positive, this has been among the more disappointing stretches in recent memory. However, the recent weakness reflects a concentrated and rapid selloff driven by specific holdings and sector dynamics, rather than broad deterioration across the portfolio. Through February, the strategy was outperforming, and similar periods of sharp relative underperformance have historically been followed by recovery.

Source: Morningstar. Data as of 5/15/2026. 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.

Wide Moat Companies Behind the Drawdown

Stock selection, not just sector positioning, has been the primary culprit behind the year-to-date gap. A concentrated group of wide-moat companies experienced sharp price declines since March 1, 2026, and their meaningful weights in the index led to outsized negative contributions. Notably, each of these companies retain wide economic moat ratings from Morningstar, and in several cases the recent price weakness has made them more compelling from a valuation standpoint, in Morningstar’s view.

Please see below for fund concentrations of the companies referenced herein.

Source: Morningstar. Returns from 3/1/2026 to 5/15/2026. Past performance is no guarantee of future results. Not a recommendation to buy or sell any individual security. 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.

Putting Recent Moat Index Performance in Historical Context

The Moat Index has experienced concentrated periods of underperformance before, followed by multi-year recoveries, rewarding investors who remained patient. Two prior episodes are particularly instructive.

2014–2015: The Moat Index lagged the S&P 500 Index by roughly 4% in 2014 and 6% in 2015. The Moat Index’s valuation-driven stock selection and energy exposure weighed on returns. The Index subsequently rebounded, posting excess returns relative to the S&P 500 Index in each of the following four calendar years (2016-2019).

2020–2021: A similar dynamic played out during the global pandemic era. The Index underperformed the S&P 500 Index in both years as growth and speculative assets dominated. In 2022, the Index held up significantly better in the bear market, declining only 13% versus the S&P 500 Index’s 18% drop. Then in 2023, the Index surged 32%, outperforming by over 6 percentage points.

The pattern is consistent with historical evidence on moat investing: mean reversion tends to favor disciplined approaches when valuations become stretched in one direction. The chart below shows relative returns across both cycles, extending into 2026 and 2027 where the outcome remains, of course, unknown.

Moat Index Excess Returns vs. S&P 500 Index

Source: Morningstar. Data as of 5/15/2026. 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.

Understanding Moat Index’s Current Exposure

One could argue that the Moat Index’s risk/reward and holdings exposure may look more comparable to the S&P 500 Equal Weighted Index than the cap-weighted S&P 500. Comparing similar past cycles of Moat Index returns to the S&P Equal Weighted Index provides additional, meaningful context. The Moat Index provided similar years of excess returns and recent “underperformance” was muted in 2024 and has only been noteworthy in 2026.

Moat Index Excess Returns vs. S&P 500 Equal Weighted Index

Source: Morningstar. Data as of 5/15/2026. 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.

The Case for Patient Optimism

Perhaps the most compelling reason to remain constructive on moat investing is where valuations stand today. A look at Morningstar's price-to-fair value ratio, which measures the aggregate price of each index's holdings relative to Morningstar's analyst-derived intrinsic value estimates, highlights the valuation disconnect that has emerged.

Source: Morningstar. Data as of 5/15/2026. 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.

The Moat Index trades at a 22% discount to the aggregate fair value of its holdings, while both S&P 500 indexes sit essentially at fair value. When high-quality, wide-moat businesses decline sharply without a corresponding deterioration in their competitive positions or long-term earnings power, they tend to become more attractive, not less.

The Morningstar Wide Moat Focus Index is built on a disciplined, systematic process: Morningstar's equity analysts identify companies with wide economic moats and the Index targets those trading at the most attractive valuations within that universe. Following the sell-off of recent months, the Index's portfolio now include wide moat companies trading at meaningful discounts to Morningstar’s fair value estimates.

Periods like this test conviction. But wide economic moats don't erode in a matter of weeks. The fundamentals that earned Nike, Zoetis, Clorox, Estée Lauder, and GE HealthCare their wide moat designations remain intact. What has changed is price and investor sentiment, not the competitive advantages and long-term earnings power that underpin these businesses. History suggests patience has mattered most in periods like this.

Access Quality Companies at Attractive Valuations

VanEck Morningstar Wide Moat ETF (MOAT) and VanEck Morningstar Wide Moat Fund seek to replicate as closely as possible, before fees and expenses the price and yield performance of the Morningstar Wide Moat Focus Index.

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• Muni default rates have been a fraction of corporate high yield default rates across every major credit cycle.
• The gap is driven by structural advantages: essential-service revenue streams, taxing authority, and political incentives to avoid default.
• Lower default rates combined with tax-exempt income make high yield munis a potentially attractive risk-adjusted income option, in VanEck's view.

The Default Rate Gap: Munis vs. Corporate High Yield

The historical record is clear: municipal bonds default far less frequently than corporate bonds, and the gap is especially wide in the high yield segment. Investment grade munis have a long-term cumulative default rate near 0.1%, while corporate high yield defaults have historically averaged 2% to 4% annually depending on the cycle (Source: Moody's Investors Service, "US Municipal Bond Defaults and Recoveries, 1970–2024," August 2025; Moody's Investors Service, Annual Default Study, 2025.)

Even in the high yield muni space, where credit quality is lower by definition, default rates remain well below corporate equivalents. This isn’t a coincidence. It reflects fundamental differences in what backs each type of bond.

Why Are Muni Default Rates Low?

Municipal issuers have structural advantages that most corporations don’t. Many muni bonds are backed by essential-service revenues like water, sewer, toll roads, and public power, services that generate steady cash flow regardless of economic conditions. Others are backed by the issuer’s taxing authority, giving them the ability to raise revenue to meet obligations.

There’s also a strong political incentive to avoid default. Municipalities that fail to pay bondholders face higher borrowing costs for years, which directly impacts their ability to fund public services. This creates a powerful motivation to prioritize debt service.

What Drives Corporate High Yield Defaults?

Corporate high yield issuers face a different set of pressures. Many carry significant leverage and depend on favorable credit markets to refinance maturing debt. When rates rise or credit conditions tighten, refinancing becomes more expensive or unavailable, pushing weaker issuers toward distress.

Corporate revenues are also more cyclical. A downturn in consumer spending, a shift in competitive dynamics, or a single operational misstep can erode cash flow quickly. Unlike municipalities, corporations can’t raise taxes or rely on essential-service monopolies to stabilize income.

High Yield Muni vs. Corporate Default Rates Across Credit Cycles

Source: Moody's Investors Service, "US Municipal Bond Defaults and Recoveries, 1970–2024," August 2025; Moody's Investors Service, Annual Default Study, 2025. For illustrative purposes only. Past performance is not indicative of future results.

Does Sector Matter Within High Yield Munis?

Yes. Not all muni sectors carry the same credit risk. Revenue bonds backed by essential services like water and sewer systems have some of the lowest default rates in the entire fixed income universe. Healthcare and senior living facilities tend to carry more risk, as their revenues depend on patient volumes and reimbursement rates.

Tobacco settlement bonds and certain special tax bonds also carry idiosyncratic risks. For investors accessing high yield munis through a fund, the sector mix of the portfolio matters for understanding the true credit profile.

What Do Lower Default Rates Mean for After-Tax Income in High Yield Munis?

Lower defaults mean more of the stated yield actually reaches the investor as income. In corporate high yield, a portion of the headline yield is effectively a credit risk premium that gets consumed by periodic defaults across the portfolio. In high yield munis, that drag is substantially smaller.

When you combine lower default losses with tax-exempt income, the after-tax, after-default return of high yield munis can match or exceed corporate high yield for investors in higher tax brackets, with less credit risk.

This is an illustrative example for educational purposes only. Actual results will vary based on individual tax circumstances, investment selection, and market conditions. Past performance does not guarantee future results.

How to Access High Yield Muni Exposure

The VanEck High Yield Muni ETF (HYD) tracks the ICE Broad High Yield Crossover Municipal Index, providing diversified exposure to the U.S. high yield, long-term, tax-exempt municipal bond market. For a shorter-duration option, the VanEck Short High Yield Muni ETF (SHYD) targets the 1 to 12 year maturity range within the same universe.

Both funds offer a straightforward way to access the structural credit advantages and tax-equivalent yield benefits of high yield munis.

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• U.S. power demand is reaccelerating. AI data centers, reshoring, and electrification are ending two decades of flat electricity growth.
• Reliability matters more than capacity. Always-on loads need firm, dispatchable power, which is why nuclear is back in the conversation.
• The opportunity extends beyond generation. Grid equipment, transformers, cooling, and resilience systems all benefit from rising power demand.

The Power Demand Shock Is No Longer Theoretical

After roughly two decades of essentially flat U.S. electricity demand, several converging forces appear to be driving a meaningful reacceleration in load growth. AI data centers, expanding digital infrastructure, industrial reshoring, and broader electrification across transportation and buildings are each contributing to a demand picture that looks very different from the prior cycle.

Forecasts from major utilities, regional grid operators, and federal agencies have generally been revised higher in recent years, in some cases significantly. While the timing and magnitude of demand growth will likely vary by region and by sector, many industry observers have argued that investors and grid planners may be underestimating how quickly large new loads are arriving in specific parts of the country. The directional shift away from a flat-load environment appears reasonably broad-based, even if the precise trajectory remains uncertain.

U.S. Power Demand Growth: A Reacceleration After a Flat Decade

Source: Goldman Sachs. Annual U.S. power demand growth (historical and forecast). Forecasts (2025 onward) are estimates and are subject to change. Forecasts are for illustrative purposes only and are not a guarantee of future results. Past performance is not indicative of future results.

AI Turns Power Into a Constraint

Artificial intelligence is increasingly an electricity story, not just a software story. Training and inference workloads tend to require concentrated, reliable power delivered to specific locations, which can create localized stress on the grid before national average demand figures reflect any meaningful change.

Hyperscale data centers can require very large, continuous power loads at a single site, in some cases comparable to the electricity needs of a mid-sized city. Industry research groups have generally projected that data centers may grow from a low-single-digit share of U.S. electricity consumption today to a meaningfully larger share by the end of the decade.¹ Where transmission, generation, or interconnection capacity is constrained, large new loads may face multi-year wait times, which in turn may shape decisions about where AI infrastructure ultimately gets built. In that sense, electricity is moving from a background input to a potential gating factor for AI deployment.

Reshoring and Reindustrialization Add a Second Layer

Beyond data centers, a renewed push toward domestic manufacturing in semiconductors, electric vehicles, batteries, and other strategically important industries is contributing to U.S. power demand growth. This second layer can broaden the demand picture across more geographies and sectors rather than concentrating it solely in data center hubs.

New industrial facilities tend to be electricity-intensive, and federal policy initiatives in recent years have provided incentives that may encourage further domestic manufacturing investment. Many of the projects announced under those programs involve large, continuous electrical loads that did not previously exist in the U.S. industrial footprint. The cumulative effect, alongside data center growth, may add up to a more durable demand story than any single driver in isolation.

Reliability May Matter More Than Raw Capacity

For strategic loads such as data centers and industrial facilities, the quality of power supply, including reliability, dispatchability, and grid stability, may matter as much as the absolute amount of new generation added. Total megawatt figures alone do not capture how power is delivered or whether it is available when and where it is needed.

Many digital and industrial loads operate continuously and can be sensitive to outages, voltage variability, or even brief interruptions. Different generation sources have different reliability and dispatchability profiles, and balancing variable resources with firm baseload, storage, transmission, and demand-side flexibility has become a central planning question for grid operators. As a result, the conversation around power infrastructure has shifted, in many cases, from focusing primarily on how many megawatts can be added to focusing on how reliably those megawatts can be delivered to specific loads.

Why Nuclear Re-Enters the Strategic Conversation

Nuclear power offers a combination of attributes, including high capacity factors, low operational carbon emissions, and long-duration baseload generation, that align reasonably well with the needs of large, persistent industrial and digital loads. As a result, nuclear has re-entered the strategic conversation among policymakers, utilities, and large power buyers in a way that was less common in prior decades.

Capacity factor measures actual electricity output as a share of maximum potential output. On this measure, U.S. nuclear has historically led other major generation sources by a wide margin, with a capacity factor of approximately 93.1%, compared with roughly 33.5% for wind and 23.3% for solar.² That difference reflects nuclear’s ability to run continuously regardless of weather or time of day, which is one reason it has become attractive to large, always-on power buyers.

In recent years, several large technology companies have announced power purchase agreements that involve nuclear sources. Microsoft, for example, agreed to support the restart of a previously retired reactor at Three Mile Island to help power its data center operations, and Amazon entered into a multi-year arrangement to source nuclear power for its cloud infrastructure. Certain previously retired or curtailed plants have been considered for restart or life extension, and interest in next-generation reactor designs, including small modular reactors, has grown among utilities and government programs.

Nuclear is not without considerations. Historically, large nuclear projects have faced cost overruns, long permitting and construction timelines, fuel cycle complexity, and varying public perception. The current administration has acknowledged these timeline challenges and has announced executive actions and policy support intended to streamline the approval process and accelerate development of new nuclear capacity, which may help address some of the historical bottlenecks. Outcomes will likely still depend on policy follow-through, financing structures, and the industry’s ability to deliver projects on time and on budget, and investors should weigh these considerations alongside the demand-side tailwinds when evaluating exposure to the nuclear theme.

Where Does the Power Infrastructure Investment Opportunity Extend Beyond Generation?

The investment opportunity tied to rising power demand may extend well beyond electricity generation itself. It can include the broader infrastructure needed to deliver, manage, and protect the power supply, including transmission and distribution equipment, transformers and other grid components, cooling and power management systems, and resilience or backup technologies.

Each of these segments has its own competitive dynamics, supply chain considerations, and policy exposures, and the timing and durability of demand will likely vary across categories. Investors evaluating the broader power theme may want to consider which parts of the value chain are most directly exposed to the demand drivers they find most compelling.

Electricity as a Strategic Asset Class

Power availability and reliability appear to be moving from the background of investment analysis toward the foreground, somewhat similar to how semiconductors and logistics have increasingly been recognized as strategic considerations across the broader economy. In this framing, electricity is not simply an input cost. It can also be a constraint that helps shape where capital is deployed and which industries are able to scale.

Capital allocation decisions in artificial intelligence, cloud computing, advanced manufacturing, the defense industrial base, and broader electrification may increasingly depend on access to reliable and affordable power. For long-horizon investors, this dynamic may suggest treating power infrastructure as a thematic exposure rather than purely a defensive utility allocation, while still recognizing the cyclical and regulatory risks that have historically affected the sector.

How Can Investors Access Nuclear and Power Infrastructure Exposure?

For investors looking to express a view on nuclear power and the broader uranium and nuclear ecosystem, exchange-traded funds offer one accessible vehicle. The VanEck Uranium and Nuclear ETF (NLR) is designed to provide diversified exposure to companies involved in uranium mining and nuclear power generation, including utilities, plant operators, and related industry participants across multiple geographies.

NLR seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MarketVector Global Uranium and Nuclear Energy Index, which is intended to track the overall performance of companies involved in the uranium and nuclear energy industry. The fund offers exposure across multiple segments of the nuclear value chain in a single, exchange-listed, daily-liquid vehicle.

As the demand for reliable, dispatchable power grows alongside the build-out of AI infrastructure, reshoring, and broader electrification, nuclear is increasingly positioned at the center of the strategic baseload conversation. NLR offers investors comprehensive exposure to the nuclear ecosystem in a single trade, providing one way to participate in the long-term theme of electricity as a strategic asset.

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• Byproduct commodities like helium, sulphur, bromine and naphtha have no supply chains of their own and vanish the moment someone stops drilling or refining for something else.
• Unlike oil, none of these critical materials have strategic stockpiles — when supply stops, there is nothing to buy time while the world adjusts.
• The near term picture is more resilient than the headlines suggest, but the impulse to diversify is already visible.

The Strait of Hormuz crisis has been treated primarily as an oil story. Brent surged past $125 a barrel. Headlines tracked tanker movements. Governments debated strategic petroleum reserves.

That framing misses the bigger picture.

Beneath the oil headlines, something else is breaking. There is a category of materials that underpins modern life but has no supply chain of its own. These materials do not have their own markets, their own price benchmarks, or their own logistics networks. They exist only because someone, somewhere, decided to process natural gas or refine crude oil, and they happened to come along for the ride. They are byproducts. Hitchhikers. Their availability is not determined by their own supply and demand. It is determined by production decisions made for an entirely different commodity. When the host process runs, they appear. When it stops, they vanish. And right now, across multiple industries, the host processes have all stopped at once.

The Commodities Hidden Inside Modern Life

Most people have never thought about industrial gases. But they are everywhere. Helium cools MRI magnets to near absolute zero. Hydrogen powers the light sources inside the most advanced chip making machines. Oxygen is blown through molten iron at over 1,700°C to make steel. Nitrogen blankets semiconductor clean rooms to prevent contamination at the atomic scale. Neon fires the lasers that etch transistors onto silicon. These gases reach their customers through dedicated pipelines built into factory floors on contracts running 15 to 30 years, as cryogenic liquids in vacuum insulated tanker trucks, or compressed into high pressure cylinders for thousands of smaller users. The infrastructure is vast, invisible, and almost none of the gases that flow through it have a supply chain designed to survive a disruption.

Helium is separated from natural gas during LNG processing. Nobody drills for it. Nobody mines it. It is the only element on the periodic table that, once released, leaves Earth permanently. It cools every MRI scanner, every advanced chip factory, every rocket fuel system. Qatar produced roughly a third of global supply before Iranian strikes forced the Ras Laffan complex offline. Two of fourteen LNG trains suffered damage that may require 3 to 5 years to repair. Spot prices surged. Hundreds of cryogenic containers were reportedly stranded near the Strait, and because liquefied helium evaporates continuously in transport, much of that inventory may already be unrecoverable.

Sulphur is recovered from oil refining and gas sweetening. It is the feedstock for sulphuric acid, without which you cannot produce phosphate fertilizers, leach copper from ore, or extract nickel for battery cathodes. Nearly half of all seaborne sulphur trade transits the Strait. The Middle East supplied 63% of Asia's sulphur imports in 2025. The Kuwait benchmark hit $765 a tonne, the highest since its launch. China banned sulphuric acid exports. Russia extended its own sulphur export ban. There is no strategic reserve. Anywhere. And sulphur's disappearance does not stop at sulphur. It cascades. Less sulphur means less sulphuric acid. Less sulphuric acid means less phosphate fertilizer. Less fertilizer means lower crop yields. Lower crop yields mean higher food prices. The first link breaks and every subsequent link feels it with a lag, and by the time the damage is visible, the planting window has closed.

Bromine, 75% of which comes from the Dead Sea, sits inside the flame retardants in virtually every circuit board, cable, and electronic casing manufactured anywhere in the world. It is also used in the plasma etching that carves fine features onto advanced semiconductors. Like helium and sulphur, it is not produced for its own sake. It is extracted from brine as part of potash and mineral processing. Its supply is determined by someone else's production economics.

Naphtha is a byproduct of crude oil refining. It is the primary feedstock for the petrochemical crackers that produce polyethylene, polypropylene, and the plastics that run through virtually every manufacturing supply chain on earth. Asia depends on the Middle East for over 55% of its naphtha imports. When the Strait closed, that feedstock stopped arriving. Petrochemical plants in South Korea and Indonesia declared emergency shutdowns within days, cutting operating rates by a quarter to a third. Roughly $26 billion of petrochemical and plastics trade from the region is exposed, around 9% of global flows.

Same structural flaw in every case. Byproduct economics. Geographic concentration. No independent supply chain. No strategic reserves.

Where Is the Safety Net?

The hitchhiker commodities are handled by some of the largest industrial companies in the world. Refineries recover sulphur. ICL and Albemarle produce bromine. Dow, LyondellBasell, and Westlake run petrochemical crackers. What none of them have built is a buffer. There is no strategic reserve for sulphur. No stockpile mechanism for bromine. No naphtha inventory beyond what sits in tankers and port storage. The only hitchhiker commodity where anyone has built even a partial safety net is helium, and that infrastructure sits with three companies: Linde, Air Liquide, and Air Products. They manage the global distribution of helium, hydrogen, nitrogen, and dozens of specialty gases across chemicals, manufacturing, healthcare, and electronics. More than half their revenue is locked into long term onsite contracts. They have built underground salt cavern storage in Texas, Germany, and the United States that can hold helium indefinitely at scale, and those caverns were well stocked heading into the crisis because Russian supply had actually been loosening the market through 2025. As chips get smaller, the gases required to make them become more exotic and more critical: extreme purity levels, a single advanced chip making machine consuming roughly 10,000 litres of hydrogen per hour, a single contamination event in a memory chip production line causing losses over $20 million in a month. For these companies, a helium price spike is a margin event, not a crisis. A 10% increase in helium prices translates to earnings boosts of roughly 0.7% for Linde, 1.1% for Air Liquide, and 2.3% for Air Products. They benefit from scarcity. Industrial gas pricing has risen 40 to 50% since 2019, consistently outpacing inflation, because gases represent a small but critical share of customer costs and no management team will risk a production shutdown over a gas bill. They also benefit from the reshoring and factory construction that follow every disruption. For every other hitchhiker commodity, the ride has stopped and there is no safety net to catch the fall.

What the Market Sees, and What It Doesn't

The near term picture is more resilient than the headlines suggest. Semiconductor fabs hold roughly six months of helium inventory and recycle at 75 to 90% efficiency. TSMC, Samsung, SK Hynix, Intel, and Infineon have all indicated no production disruption. The United States is the world's largest helium producer. The industrial gas majors' caverns provide a buffer. Anyone who tells you the chip industry is about to shut down because of helium is overstating the case.

But resilience in one sector does not mean resilience everywhere. Sulphur feeds sulphuric acid, which feeds fertilizer, which feeds crops, which feeds people. Helium shortages hit hospitals before they hit chipmakers, because MRI departments cannot outbid semiconductor fabs. Global manufacturing activity had just begun signaling a recovery before the shock hit. After 2022, manufacturing indicators in developed markets fell sharply and four years later had still not recovered.

Beneath the resilience and the cascading risk sits something more structural. There are no strategic reserves for any of these commodities. The US helium reserve was sold off in the 1990s. No country stockpiles sulphur. Strait transit volumes have dropped roughly 95%. The entire architecture was designed around one assumption, and on February 28 that assumption broke.

What to Watch

The impulse to diversify is already visible. But diversification that replaces reliance on the Middle East with reliance on Russia for helium or China for renewables does not solve the structural problem. It relocates it. After the oil shocks of the 1970s, global demand growth went from 8% a year to marginal declines within a decade. The question is whether this crisis will trigger a similar rethinking, not just of where these materials come from, but of whether an economy built on byproducts can continue to treat their supply as someone else's problem.

The hitchhiker commodities have always been there. They have always ridden on someone else's infrastructure, invisible until the moment the ride stops. That moment is now.

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New York City is facing one of the most significant fiscal challenges in recent memory. The NYC Comptroller has projected a $2.2 billion budget shortfall for FY2026, growing to a $10.4 billion gap in FY2027 (Source: New York City Comptroller, January 2026). That is a two-year deficit of roughly $12.6 billion.

Into that context steps the pied-à-terre tax.

What Is The Pied-à-Terre Tax?

The proposal would levy an annual surcharge on condos, co-ops, and 1-3 family homes valued above $5 million where the owner maintains a primary residence outside New York City. Governor Hochul estimates approximately 13,000 properties would qualify. The city projects $500 million in annual revenue (Source: New York State Government, April 2026).

Even at the $500 million headline figure, the pied-à-terre tax covers less than 5% of the projected two-year gap. At the more realistic $340 to $380 million range, the contribution is smaller still.

NYC Budget Gap: Potential Revenue Falls Short