Healthcare Stocks Experience a Breakout Amid Chip Bear Market

While the semiconductor market has been experiencing a bear market, the healthcare sector has been quietly breaking out. This phenomenon has been observed for months, with the iShares Biotechnology ETF (IBB) climbing more than 20% since semiconductors peaked on June 22. The Health Care Select Sector SPDR Fund (XLV) has gained roughly 16% over the same period, while the iShares Semiconductor ETF (SOXX) has fallen just under 20%.

The recent surge in healthcare stocks, particularly in biotechnology and pharmaceutical companies, has been attributed to several factors. One reason is the growing demand for innovative treatments and medications, which has led to increased investor interest in the sector. Additionally, the sector’s underperformance in the past three years has created a unique setup, where an early-stage return of investor interest could give the breakout more room to run.

According to Todd Sohn, chief ETF strategist at Baird Strategas, healthcare ETFs suffered more than $20 billion of combined outflows from 2023 through 2025. However, the sector has seen a significant inflow of $4.5 billion so far in 2026, indicating a growing interest in healthcare investments.

The rally in healthcare stocks is not limited to a single biotech moonshot. Excluding Moderna, roughly two-thirds of the healthcare stocks in a broad Yahoo Finance screen of more than 100 names are higher this week. Most biotech, pharmaceutical, and life-sciences tools stocks are participating, with Merck (MRK), IQVIA (IQV), Danaher (DHR), and Thermo Fisher (TMO) among the leaders.

Not every corner of the healthcare sector is joining in, however. Managed-care stocks remain weak, keeping this from looking like a simple rush into defensive industries.

The change in leadership is enormous in dollar terms. Since Aug. 14, Nvidia (NVDA), Broadcom (AVGO), AMD (AMD), and Intel (INTC) have collectively shed nearly $500 billion in market value. Over the same stretch, Eli Lilly (LLY), Merck, AbbVie (ABBV), Moderna, Johnson & Johnson (JNJ), and Thermo Fisher have added more than $200 billion.

The price move in healthcare stocks looks dramatic. However, the money coming back into the sector looks much less dramatic. Healthcare ETFs have taken in about $4.5 billion so far in 2026, which is a relatively small amount compared to the sector’s market value.

The IBB has decisively broken above the area around its 2021 high near $178, which has repeatedly stopped rallies for almost five years. The ETF was trading above $210 on Thursday afternoon, putting it well beyond that old ceiling.