What a difference a theme makes: The 10 best and worst ETFs of FY26

Every financial year tells a story. In FY26, that story was artificial intelligence (AI).

But not through Nvidia or the Magnificent Seven alone. Instead, the AI trade broadened into the companies supplying the infrastructure needed to scale it - semiconductor manufacturers, memory chip producers, power infrastructure and critical minerals.

That shift helped propel the Global X Semiconductor ETF (ASX: SEMI) to the top of the leaderboard, while South Korean equities, hydrogen, battery technology and rare earths also enjoyed exceptional years.

At the other end of the spectrum, investors who backed cryptocurrencies, bet against the Nasdaq or remained heavily exposed to enterprise software endured a difficult year as capital increasingly favoured the companies enabling the AI buildout.

Below are the best and worst-performing ASX-listed ETFs of FY26 by total returns, and the themes that defined the year. Don't forget to complete the poll at the end and tell us which theme you think will dominate FY27.

AI moves beyond Big Tech

The Global X Semiconductor ETF (ASX: SEMI) topped the leaderboard with a return of 166.8% as investors looked beyond AI's biggest names and towards the companies building the hardware needed to support its next phase of growth.

"Semiconductors were the defining investment theme of FY26, as the AI trade broadened beyond the hyperscalers and Magnificent Seven into the hardware supply chains powering the next phase of AI infrastructure," says Marc Jocum, Portfolio Manager at Global X.

He believes the market increasingly recognised that scaling AI would require enormous investment in physical infrastructure.

"The key bottlenecks in AI are increasingly found not in software, but in the physical infrastructure required to scale it."

The same theme helped lift the iShares MSCI South Korea ETF (ASX: IKO) to second place with a return of 166.3%, while the Betashares Asia Technology Tigers ETF (ASX: ASIA) surged 97%.

As impressive as South Korea's rally was, it was also highly concentrated. Samsung Electronics and SK Hynix account for around half of IKO's portfolio, meaning much of the ETF's stellar performance was driven by two companies at the centre of the AI memory-chip boom, both of which rocketed past US$1 trillion market capitalisations during FY26.

Critical minerals return to favour

Another major theme to emerge in FY26 was the recovery in critical minerals and battery technology.

The Betashares Energy Transition Metals ETF (ASX: XMET), Global X Battery Tech & Lithium ETF (ASX: ACDC) and Global X Rare Earth and Critical Metals ETF (ASX: GMTL) all featured among the year's top 10 performers as sentiment towards the sector improved.

Jocum says investors increasingly recognised that electrification and energy security remain powerful long-term structural themes.

"The recovery across critical minerals and battery technology reflected growing recognition that electrification and energy security remain powerful long-term structural themes," he says.

"Improving lithium prices, accelerating energy storage deployment, rising electric vehicle demand and increasing geopolitical focus on securing strategic supply chains helped drive renewed investor interest across rare earths, battery manufacturers and critical metals producers."

Betashares' Senior Investment Strategist Cameron Gleeson agrees critical minerals, the inputs essential for the build out of AI data centres, EVs, renewable energy and defence technology, sit at the intersection of future technologies and geopolitics.

He points to China, which controls over 60% of global refined critical mineral supply and 90% of rare-earth magnets.

"In response to the risk of this dependence, western countries like the US, EU and Japan are working together to strengthen the ex-China supply of critical minerals, and introduce anti-dumping duties to stop market distortions," Gleeson says.

"After languishing for years, the prices of lithium, copper, nickel and other critical minerals have staged a strong recovery."

Selected producers of these minerals from allied countries, like Australia, Canada, Peru and Chile, are likely to benefit from strategic government support, including cheap financing, tax incentives, US market access, greater price certainty, and state-led equity injections.

The dark horses

While semiconductors dominated the headlines, two of the year's biggest surprises came from sectors that had spent several years out of favour.

The Global X Hydrogen ETF (ASX: HGEN) was the third-best performing ETF of FY26, surging 136.3%.

"Hydrogen stocks rebounded as investors reassessed the role of reliable, low-carbon power solutions in meeting the rapidly growing electricity demands of AI data centres and industrial electrification," Jocum says.

Meanwhile, the Global X S&P Biotech ETF (ASX: CURE) returned 80.5%, buoyed by renewed optimism across the healthcare sector.

"After suffering a 50% drawdown in 2022, biotechnology regained favour as accelerating FDA approvals, renewed M&A activity and improving clinical trial outcomes restored investor confidence," Jocum says.

He says the rebound "reinforces the view that innovation cycles in healthcare remain intact, particularly across obesity, oncology and precision medicine."

Crypto and contrarian bets unravel

The bottom of the leaderboard tells a very different story.

Rather than reflecting broad weakness across the ETF market, the year's biggest losses were concentrated in three themes: betting against technology, cryptocurrencies and enterprise software.

The Global X Ultra Short Nasdaq 100 Complex ETF (ASX: SNAS), which seeks to profit when the Nasdaq 100 falls, was the year's worst-performing ETF. As AI enthusiasm continued to propel technology stocks higher, investors positioned for a reversal found themselves on the wrong side of one of the market's strongest trends.

Cryptocurrency also endured a difficult year, with every Australian Bitcoin and Ethereum ETF featuring among FY26's worst performers.

Jocum says investors increasingly favoured AI infrastructure over digital assets.

"Capital increasingly rotated towards AI-related investments, where earnings growth and infrastructure spending provided a more tangible investment narrative."

Despite the weak performance, he believes the long-term case for cryptocurrencies remains intact.

"Institutional adoption continued to broaden, stablecoins and tokenisation gained further traction, and a growing number of investors began revisiting Bitcoin's potential role as a hedge against fiscal expansion, sovereign debt accumulation and the gradual diversification away from the US dollar-centric financial system."

One outlier was the Lakehouse Global Growth Fund Active ETF (ASX: LHGG), which lost 36%.

The active fund was hurt by a sharp derating in the enterprise software sector, where it held concentrated positions in companies such as ServiceNow (NYSE: NOW) and Workday (NASDAQ: WDAY).

While many leading software names fell 40-50% over the year, Lakehouse has argued in recent fund updates that the sell-off has created attractive valuation opportunities for long-term investors.

Vote for your top FY27 theme

Crystal ball time: Which investment theme will dominate the next 12 months?