Health care ETFs spent 2026 between a 28% biotech rally and a 16% device slide

The State Street SPDR S&P Biotech ETF AXBI is up 28.4% this year. The iShares U.S. Medical Devices ETF BIHI is down 16.4%. Between those two sleeves sit 44.8 percentage points inside one sector label. The fund most people mean when they say they own U.S. health care, the $43.0 billion State Street Health Care Select Sector SPDR ETF AXLV, sat in the middle at 9.1% as of mid-morning Monday, September 14, trailing the S&P 500 ETF ASPY at 12.1%.

Biotech surged. Medical devices did not

AXBI holds 154 names on $10.6 billion, and no position is larger than Moderna at 2.9%. The top ten are 15.9%. It trades like a sector product, with about $1.37 billion of average daily turnover. The 12-month gain of 64.2% is a recovery: the fund's maximum drawdown over five years is 54.0%, and the five-year total return is only 17.3%.

The iShares Biotechnology ETF AIBB is the conventional, more concentrated version. Vertex Pharmaceuticals is 7.9%, Amgen 7.8%, Gilead 7.4%. It runs $10.3 billion at a 0.44% fee and is up 41.5% over 12 months. 47.5% of AIBB sits in ten names, while no AXBI holding clears 2.9%. That construction is this year's gap: 20.4% for AIBB against 28.4% for AXBI.

Medical devices are the other 2026. BIHI is down 16.4% this year and 15.7% over 12 months, 19.9% below its 52-week high. Abbott Laboratories is 18.7% of the fund and is down 15.9% year to date. Intuitive Surgical is 13.3% and is down 33.5%. Those two names are 32.0% of a 46-stock portfolio. The top ten are 74.5%.

Boston Scientific is 3.9% of BIHI and 1.1% of AXLV, and is down 53.6% this year and 57.6% over 12 months, 58% below its 52-week high. The company lowered 2026 sales-growth guidance in April and again in July, citing a slowdown in its WATCHMAN left-atrial device and U.S. electrophysiology, and in September said a cyberattack that disrupted manufacturing and shipping made it unlikely to meet the remaining targets. Intuitive Surgical has described a deceleration in U.S. procedures even as global case volume grew. Device demand did not vanish. The stocks repriced anyway.

Equal-weight equipment tells on the concentration. The State Street SPDR S&P Health Care Equipment ETF BXHE tracks a modified equal-weighted equipment index, holds 69 names, and keeps its largest position at 3.0%. It is up 3.3% this year: 19.7 percentage points ahead of BIHI, on only $170 million of assets. Same industry, less Abbott, less Intuitive, a different year.

Providers and services went the other way. The iShares U.S. Healthcare Providers ETF BIHF is up 20.3% this year, with UnitedHealth at 20.1% and the top ten at 71.8%. UnitedHealth itself is up 18.3% year to date and still down 15.5% over three years, after a 62.0% peak-to-trough decline. The State Street SPDR S&P Health Care Services ETF AXHS is up 28.9%, but it is a $220 million equal-weight sleeve, not a substitute for the sector.

That split is what happens when health care is allowed to mean a drug pipeline, a surgical-capital cycle, and an insurance book at the same time.

AXLV, AVHT, and the illusion of breadth

Eli Lilly is a $1.07 trillion drugmaker that occupies 14.9% of AXLV.

Broad, in this product, is a description of an S&P 500 sector index, not a promise that an obesity-drug franchise will share the year with a hospital chain or a surgical robot.

AXLV tracks the Health Care Select Sector Index, the S&P 500's pharmaceuticals, biotechnology, equipment, providers, life-science tools, and health-care technology industries, weighted by market value. It holds 60 stocks, charges 0.08%, and turns over about $1.64 billion of shares on an average day. The top ten names are 60.9% of assets. Holdings are as of September 13. Over 12 months AXLV is still ahead of ASPY, 22.0% against 16.9%. Over three years it lags, 33.4% against 77.4%. The sector caught up, then stalled.

The Vanguard Health Care ETF AVHT looks, on a fact sheet, like the diversified alternative. It holds 411 stocks, reaches into mid- and small-cap U.S. health care, and costs 0.09% on $20.9 billion of assets. Eli Lilly is still 13.4%. The top ten are still 52.0%. The two books share 59 companies and 85% of their weight. AVHT is up 9.9% this year and 23.0% over 12 months: a slightly broader path to almost the same result.

AXLV is the S&P 500 sector index. AVHT adds hundreds of smaller holdings that still leave the economic exposure overlapping the giant. The iShares U.S. Healthcare ETF BIYH charges 0.37% for a 9.3% year-to-date return. Breadth in the catalog is not the same as breadth in the money.

BRSPH's 2026 lead

The Invesco S&P 500 Equal Weight Health Care ETF BRSPH owns almost the same list and a different portfolio. It equal-weights the S&P 500's health care constituents and rebalances quarterly. It holds 60 stocks, costs 0.40%, and runs $835 million. Moderna is the largest position at 4.5%. Shared names with AXLV cover 50% of weight, not 85%.

That construction is the 2026 gap among broad funds. BRSPH is up 15.3% this year, 6.1 percentage points ahead of AXLV, and 24.3% over 12 months. Equal weight gave the biotech and mid-cap names in the S&P 500 sector a full seat. Cap weight gave Lilly a 15% seat in a year when Lilly's total return is 6.5%.

Merck is up 39.5% year to date and 75.7% over 12 months. Johnson & Johnson is up 32.3% and 54.3%. Those two helped the cap-weighted funds. They were not enough to match a book that refuses to let one $1 trillion company set the pace. Over five years the ranking flips: AXLV has returned 32.7%, BRSPH 18.0%. This year's lead is a construction result, not a new law of the sector.

The cores and the sleeves:

Returns as of mid-morning Monday, September 14; holdings as of September 13. The cheap cap-weighted cores are bunched. Equal weight is the different broad fund. The sleeves are a different sport.

Lilly's quieter year

The obesity-drug franchise that built Lilly's 14.9% slot in AXLV is still compounding in the operating numbers. Lilly reported first-quarter 2026 revenue of $19.8 billion, up 56%, and raised full-year revenue guidance to $82.0 billion to $85.0 billion. The FDA approved Foundayo, its oral GLP-1, orforglipron. A Medicare GLP-1 access program launched on July 1 had drawn more than 500,000 seniors by late August, according to the White House. The stock's trailing year is 51.5%. The calendar year is 6.5%, with a 5.7% decline over the past month and a price 11.9% below its 52-week high.

That is the concentration risk in plain sight. AXLV did not become a Lilly fund this year. It already was one. A quieter Lilly year is a quieter cap-weighted health care year, even when Merck and Johnson & Johnson are strong, and even when the VanEck Pharmaceutical ETF APPH raises the Lilly weight further, to 18.9%, on a 26-stock book. Negotiated Medicare prices for the first ten Part D drugs took effect January 1, one reimbursement rule across AXLV's 60 names and that Lilly weight.

The health care already inside ASPY

ASPY already has 9.3% in health care. Buying AXLV on top of a 500-stock fund is not an introduction to the industry. It is a decision to take the sector from a 9.3% sleeve to a dedicated book whose largest bet is the same mega-cap drugmaker the index already owns.

The product shelf around that decision is now a set of distinct machines. AXLV and AVHT are cheap, liquid, Lilly-heavy expressions of the S&P 500 and investable-market sector. BRSPH is the equal-weight version of the same S&P 500 list, smaller and more expensive, and the 2026 leader among broad funds for exactly that reason. AXBI spreads the pipeline across 154 names; AIBB loads 47.5% of its weight into ten names. BIHI is the operating-room book; BIHF is the payer book. Fees range from 0.08% on the giants to 0.35% and 0.44% on the specialists. Equal-weight health care, a broad fund, costs 0.40%.

The demand for care is not the open question. The open question is which profit-and-loss statement a sector fund was actually buying. In 2026 the names did not move as one. A holder of AXLV owned Lilly's quieter year, Merck's surge, and a diluted version of the device drawdown. A holder of AXBI owned the pipeline recovery. A holder of BIHI owned Abbott, Intuitive Surgical, and a capital-equipment cycle that broke. Same theme label. Three results.