Key Takeaways
- AI hardware led global markets. Korean chipmakers SK Hynix and Samsung Electronics surged, lifting global growth funds with heavy semiconductor exposure, including BMO Global Innovators and Fidelity Global Innovators.
- Canadian financials lifted dividend funds. Strong gains among banks, insurers, and diversified financials pushed dividend-focused strategies like the iShares Canadian Select Dividend ETF and TD Dividend Growth Fund into the top ranks of Canadian equity.
- Emerging markets outpaced developed markets. EM equities rose 24%, their best quarter since the second quarter of 2009, helped by Asia’s central role in the AI semiconductor supply chain.
Q2 2026 Index Returns at a Glance
AI stayed a major theme in markets in the second quarter, but the winners and losers split sharply along hardware and software lines. Investors rewarded companies supplying scarce memory and data storage, while software firms—seen as exposed to AI agents and the risk of losing seat-based pricing—were punished. The Morningstar Global Semiconductors Group Index gained 61.4% in the quarter, far outpacing the 6.0% return for global software.
NVIDIA NVDA continued to perform well, returning 14.9% over the period. But the bigger gains went to companies supplying the memory and storage that AI systems run on. Micron MU, SK Hynix 00060, and Samsung Electronics 005930 benefited from surging demand for high-speed memory chips used in AI processors, and Western Digital WDC gained on rising demand for data storage.
Korean Chip Stocks Take the Lead
AI Lifts Global Stock Funds
Strong performance from AI memory and data storage stocks pushed several innovation-focused funds toward the top of Canada’s global equity fund rankings.
Investors should remember that quarterly rankings reflect what the market rewarded over a short period, not necessarily manager skill, and they’re no guarantee of future returns. To keep this meaningful, this article includes Morningstar ratings for longer-term context, and we limited the lists of the top performers to funds with at least three years of history and over $500 million in assets.
Innovation Funds Lead Global Equity Rankings
Fidelity Global Innovators FID5982, Canada’s largest global equity fund at over C$34 billion as of June 30, was among the top performers. Managed by Mark Schmehl since its 2017 inception, the fund targets innovative and disruptive companies, with semiconductors making up 26.6% of its portfolio as of June 30.
BMO Global Innovators BMO95164, led by Malcolm White and Jeremy Yeung, outpaced Fidelity Global Innovators. The pair were part of a 13-person global equity team that moved from CI Investments to BMO Global Asset Management in 2022, and they had previously managed the CI Global Alpha Innovators CINV fund since 2011.
Emerging Markets Rode the Same Semiconductor Wave
That same dynamic explains why emerging markets outperformed. The AI supply chain is heavily concentrated in Asia. EM equities rose 24%, making for their best quarter since the second quarter of 2009, while Asia ex-Japan returned 27%, led by Korea and Taiwan. Korea’s SK Hynix and Samsung were the biggest contributors, while Taiwan Semiconductor 2330 (the largest emerging-market stock by market cap) gained a further 50%.
Emerging Markets Led as Korean Chip Stocks Rallied
A Concentration Caveat
Emerging markets’ recent gains weren’t broad-based. Much of the rise came from a small group of semiconductor companies, and their share has kept growing. As of June 30, Taiwan Semiconductor, Samsung, and SK Hynix made up 25% of the Morningstar Emerging Markets Index, and information technology overall accounted for 42%, higher than the sector’s weighting in the Morningstar US Market Index.
Emerging Markets Have Become a Tech-Heavy Benchmark
Canadian Winners: Heavy on Financials, Light on Energy and Materials
Sector divergence drove relative performance in Canadian equities in the quarter. The Morningstar Canada Financial Services Index climbed 26.3%, while the Morningstar Canada Energy TME Index fell 4.4% and the Basic Materials TME Index fell 11.8%. Funds overweight in financials and underweight in energy and materials came out ahead. This gave an edge to dividend and income-oriented funds, which typically carry higher weightings in the financial sector.
Three top performers—iShares Canadian Select Dividend ETF XDV, Vanguard FTSE Canadian High Dividend Yield ETF VDY, and TD Dividend Growth Fund TDB856—each held more than 50% in financials.
Canadian Dividend Funds Ride the Bank Rally
Several ESG funds were also among the quarter’s top performers, helped by their underweight to energy, which lagged as oil prices declined. The iShares ESG Advanced MSCI Canada ETF XCSR, which holds no energy stocks, ranked among the top Canadian equity funds.
