Diverging ETF Performance Amid Contrasting Stock Moves: UNH vs. AMAT in Q3 2025

In Q3 2025, the U.S. stock market witnessed a striking divergence between two industry giants: UnitedHealth Group (UNH) and Applied Materials (AMAT). While UNH surged nearly 14% in a single day following a surprise investment by Warren Buffett's Berkshire Hathaway, AMAT plummeted 14% despite beating earnings estimates. This contrast not only highlights the volatility of sector-specific stocks but also underscores how ETFs tracking healthcare and semiconductor industries are being reshaped by these divergent performances.

Healthcare ETFs: UnitedHealth's Rally Drives Sector Resilience

UnitedHealth Group's meteoric rise in July 2025—spurred by Berkshire Hathaway's disclosure of a $5 million shareholding—acted as a lifeline for healthcare ETFs. The stock's 14% jump directly boosted funds like the Health Care Select Sector SPDR Fund (XLV), where UNH holds a 4.63% weighting. XLV's 7.85% year-to-date (YTD) return in Q3 2025 reflects the sector's defensive appeal, even as broader markets grappled with inflation and rate hikes.

The Vanguard Health Care Index Fund (VHT) and iShares US Healthcare ETF (IYH) also benefited from UNH's momentum, with both funds posting mid-single-digit YTD gains. These ETFs, which hold UNH at 4.20% and 4.63% respectively, exemplify how a single stock's performance can disproportionately influence a sector's ETF dynamics. For investors, this underscores the importance of monitoring large-cap holdings in healthcare funds, as their volatility can amplify returns or risks.

Semiconductor ETFs: AMAT's Decline Exposes Sector Vulnerabilities

In stark contrast, Applied Materials' 14% drop in July 2025—despite strong Q3 earnings—sent ripples through semiconductor ETFs. AMAT, a critical supplier of manufacturing equipment, holds a 4.63% weighting in the iShares Semiconductor ETF (SOXX) and a 4.20% stake in the SPDR S&P Semiconductor ETF (XSD). Its sharp decline dragged down these funds, which rely on AMAT's exposure to chipmaking infrastructure.

The VanEck Semiconductor ETF (SMH), which also includes AMAT at 4.63%, saw its 5-year annualized return dip below its peak of 29.6% as macroeconomic concerns and China-related tariffs weighed on sentiment. Unlike healthcare ETFs, semiconductor funds are more susceptible to cyclical demand shifts and supply chain disruptions. AMAT's earnings call highlighted these risks, noting that global trade uncertainties could dampen Q4 revenue forecasts.

Sector Divergence and Rebalancing Opportunities

The contrasting trajectories of UNH and AMAT reveal a broader theme: sector-specific ETFs are increasingly influenced by individual stock dynamics. Healthcare ETFs, with their focus on non-cyclical demand and dividend yields, offer stability in volatile markets. Semiconductor ETFs, meanwhile, remain tied to technological innovation and global macroeconomic factors.

For investors, this divergence presents rebalancing opportunities. Healthcare ETFs like XLV and VHT, with their defensive characteristics and exposure to high-growth firms like Eli Lilly, may appeal to risk-averse portfolios. Conversely, semiconductor ETFs such as SOXX and SMH, despite AMAT's drag, still offer long-term upside in AI-driven demand. However, investors should consider the higher volatility of leveraged semiconductor funds like SOXL and SOXS, which magnify sector swings.

Strategic Takeaways for Q3 2025

1. Healthcare ETFs: Prioritize funds with diversified exposure to both large-cap (e.g., UnitedHealth) and mid-cap healthcare firms. XLV's low expense ratio (0.09%) and broad index tracking make it a compelling choice for long-term investors.
2. Semiconductor ETFs: Focus on funds with equal-weight structures (e.g., XSD) to mitigate concentration risk. While AMAT's decline is concerning, its role in the chipmaking supply chain remains critical.
3. Rebalancing: Consider increasing healthcare allocations for stability and selectively adding semiconductor ETFs for growth, but monitor macroeconomic signals like China's trade policies and U.S. interest rates.

In conclusion, the Q3 2025 performance of UNH and AMAT illustrates how sector-specific ETFs are shaped by individual stock movements. Investors who understand these dynamics can better navigate the interplay between defensive healthcare plays and cyclical semiconductor bets, optimizing their portfolios for both resilience and growth.