3 Materials Stocks to Buy Before the Next Industrial Boom

The materials sector accounts for just 1.9% of the S&P 500, barely nudging out real estate for 10th place among the 11 sectors represented in that index. Despite that diminutive status, the materials sector is delivering for investors this year. As represented by a bellwether exchange-traded fund (ETF), the materials stocks residing in the S&P 500 are beating the parent index by 700 basis points so far in 2026.

Imagine what that gap would look like if an industrial boom were to come to fruition.

Some experts believe that scenario is playing out right now, proclaiming that artificial intelligence (AI) is the linchpin of the "fourth industrial revolution." And if prognostications are correct that this revolution is still in its infancy, the following stocks could have more upside in store for smart investors.

These materials stocks could be leaders in a new industrial revolution. Image source: Getty Images

Forged in steel, remaking itself with AI help

In a bygone era of AI investing -- say, maybe, just two years ago -- few investors would have flocked to steel stocks as AI plays, but today, that notion is to be embraced, not scoffed at. Up nearly 50% over the past year, Cleveland-Cliffs (NYSE: CLF), the largest producer of flat-rolled steel in the U.S., has AI legitimacy, and not just because it's looking to sell idled mills to data center companies to reduce debt.

Obviously, any new data center being constructed needs steel, potentially representing another end market for Cleveland-Cliffs, but the company's AI ties run even deeper than that. All the talk about energy as a "bottleneck" or "chokepoint" for hyperscalers is relevant to investors considering this steel stock, because upgrading or building new transmission cores requires grain-oriented electrical steel (GOES).

Guess who has the U.S. monopoly on GOES? Cleveland-Cliffs. From 2025 through 2030, the GOES market is expected to grow at a compound annual growth rate (CAGR) of 5.6%, but in North America, where Cleveland-Cliffs does business, that CAGR is estimated to be 6.1%.

And for good measure, the steelmaker recently inked a deal with Palantir Technologies to use AI in its logistics and manufacturing processes. That could result in operational efficiencies over time.

Not a chip stock, but...

Air Products and Chemicals (NYSE: APD) definitely isn't a semiconductor stock, but what's good for the chip industry can benefit this materials name because it's a major supplier of the industrial gases needed to manufacture electronic components, and that's a big reason the company is sitting on a $9 billion order backlog.

As just one example of Air Products' enviable positioning on the picks-and-shovels side of the AI trade, the materials company recently notched a deal to construct and operate a specialty gas facility for Samsung Electronics. Yes, that Samsung. The South Korean company, a giant in dynamic random-access memory, is working to address a key AI bottleneck.

Air Products isn't just an AI story. It's an execution story. The shares are up 23.5% year to date, in part because management is navigating a tough environment with aplomb, and Wall Street is taking note. There's a belief that Air Products is out of its "show me" phase and can engineer earnings growth, aided by pricing power.

Gassing up, Part 2

Linde (NASDAQ: LIN) is another producer of industrial gas, and in the helium realm, it forms an oligopoly with Air Products. These companies' podium positions in the global helium market are worth noting because supplies of that industrial gas are currently constrained by the war in Iran, as a significant share of helium flows through the Strait of Hormuz. The other issue confounding the helium market is that Russia is a major producer of the gas, and, because of Western sanctions, companies like Linde can't source it there.

That's rough on chipmakers because helium is essential for wafer cooling and contamination prevention. In a telling anecdote, the word "helium" was mentioned roughly a dozen times on Linde's first-quarter earnings conference call with sell-side analysts.

Linde notes it's well-positioned to meet current helium demand, supported by long-term commitments it's working to secure. Linde's ability to keep helium customers satisfied in a challenging environment is commendable and could pave the way for long-term share appreciation, as helium is irreplaceable in chip manufacturing.

So, without helium, there is no fourth industrial revolution, which supports the case for Linde and rival Air Products.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Linde. The Motley Fool has a disclosure policy.