June has been a month full of excitement in the ETF market. While commercial space and AI infrastructure attracted a significant amount of investor attention, biotechnology exposure comprises four out of the five top-performing equity ETFs as of June 29. The remaining fund provides exposure to the top Chinese companies involved in domestic technology and semiconductor hardware development.
Key Takeaways
- Headlined by AI-driven efficiency and increasing M&A activity, biotechnology ETFs dominated June’s top-performers, accounting for four of the five top-performing equity funds.
- The top-performing biotech ETFs consist of a mix of portfolio management styles. ARKG provides actively managed exposure to a selection of biotech firms, while BBC, SBIO, and XBI take a passive index approach.
- KSTR emerged as a top performer in June, capturing China’s domestic AI infrastructure and semiconductor buildout.
AI and M&A Driving Biotech Performance
The biotechnology sector is surging in 2026 following years of underperformance, due to advancements in artificial intelligence tools and a period of increased M&A activity
AI foundation models are being increasingly used to predict complex biological designs and protein structures, reducing early-stage research costs. Simultaneously, large pharmaceutical companies are aggressively acquiring mid- and small-cap clinical pipelines, as interest rates stabilize alongside more transparent drug pricing regulations.
In the first quarter of 2026 alone, the biotech sector saw $65 billion in M&A value, marking the strongest quarter since 2020, according to research from PwC. This momentum continued in June with numerous new acquisitions, including deals such as AbbVie (ABBV) acquiring Apogee Therapeutics (APGE) for $10.9 billion.
Biotech ETFs Dominate in June
The top-performing equity ETF in June is the ARK Genomic Revolution ETF (ARKG ), with a 24.15% return. This actively managed fund targets companies involved in DNA sequencing, gene editing, therapeutics, and molecular diagnostics.
Next, the Virtus Biotech Clinical Trials ETF (BBC ) saw a return of 20.25% during the month. BBC is a passively managed fund aimed at providing exposure to US biotech companies, by tracking the LifeSci Biotechnology Clinical Trials Index. The fund exclusively invests in biotech companies whose lead drug candidates are in clinical trials stages phase 1 to 3, and do not have FDA marketing approval.
The ALPS Medical Breakthroughs ETF (SBIO ) also saw strong performance this month returning 19.15%. The fund tracks the S-Network Medical Breakthroughs Index, which requires holdings to have at least one drug candidate in phase 2 or 3 FDA clinical trials. The index filters out companies without enough cash on hand to operate for at least two years, reducing the risk of holdings running dry of funding before a trial concludes.
Following the June semi-annual rebalance, SBIO’s underlying index gained over 10% in just six trading days. During the index reconstitution 37 companies were added to the index, while 15 were removed. Late month rallies from Biotech companies such as Apogee and Definium (DFTX) drove SBIO to be one of the" top-performing equity":https://www.etftrends.com/etf-building-blocks-content-hub/biotech-etfs-hot-start-can-continue/ ETFs in June.
Lastly for the Biotech’s, the State Street SPDR S&P Biotech ETF (XBI ) saw a return of 16.53%. The fund tracks the S&P Biotechnology Select Industry Index, providing equal-weighted exposure to biotech firms across all market capitalizations. The fund targets high-beta, clinical-stage innovators while limiting the influence of massive industry giants in the portfolio.
Capitalizing on China’s AI and Semiconductor Growth
While the biotechnology sector is experiencing a significant rally within the U.S., a swift expansion of semiconductor markets is occurring on a global scale, with particularly notable activity in China.
China is currently undergoing a massive AI infrastructure buildout driven by increasing demand for HBM (High Bandwidth Memory) and DRAM (Dynamic Random-Access Memory) chips. Companies involved in the AI components supply chain are seeing record profits and roughly 50 additional companies, including tech and semiconductor firms, have applied for IPOs in Chinese markets. The estimated fundraising plans are at least $18.7 billion, according to analysis from Reuters.
Additionally, growing investor expectations that trade tensions will ease, particularly between the U.S. and China, could reignite momentum within the Chinese technology sector. Easing chip restrictions and increasing AI-investment are expected to reinforce bullish sentiment towards Chinese equities, according to Yahoo Finance.
The KraneShares SSE STAR Market 50 Index ETF (KSTR ), has capitalized on this momentum by tracking the SSE Science and Technology Innovation Board 50 Index. The index is primarily composed of information technology (IT) firms, with approximately 70% of holdings involved in semiconductors and the AI infrastructure buildout.
The fund’s holdings have very little reliance on U.S. market performance, with a vast majority of earnings derived from localized, domestic demand rather than broader global market trends. Numerous holdings including the funds top allocation, Cambricon Technologies Corp. at a 9.85% weighting, have received significant funding from state-backed investment funds. With increasing investor demand and government support of the Chinese semiconductor market, KSTR saw a return of 16.55% in June.
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