The Sectors Quietly Winning While Investors Focus on Tech

Most investors remain hyperfocused on technology stocks and artificial intelligence (AI) stocks in particular -- understandably so. AI still promises to revolutionize the world in ways we've yet to even realize. These tickers also continue to perform well despite their steep valuations.

Just don't forget that there are other sectors besides tech names worth owning. Indeed, a handful of other industries' stocks are at least keeping pace with the technology sector, if not beating it outright. Here's a closer look at three of them that you might want to make a point of holding in your portfolio.

Energy

This group has been on fire of late. The State Street Energy Select Sector SPDR ETF (NYSEMKT: XLE) is up 32% since the end of last year versus the S&P 500's gain of 10%, and the Vanguard Information Technology ETF's (NYSEMKT: VGT) advance of just under 20% in this time frame.

Some of the energy sector's sizable gain can be attributed to the military conflict in Iran, which has disrupted oil supply chains, pushing crude's price up from $67 per barrel since the conflict's beginning in early March to over $100 per barrel now. It's worth noting, however, that oil stocks were doing pretty well even before this geopolitical tension materialized. Most of the sector's year-to-date gains were seen before March.

It remains to be seen if there's any more room for crude's price to move even higher, pushing these stocks higher with it. But don't rule out the possibility. With the Strait of Hormuz still essentially closed, the International Energy Agency now predicts an average global production/supply deficit of 1.78 million barrels per day for the entirety of 2026, reversing the full-year surplus projected every month for the prior 12 months.

And the thing is, once the conflict ends, it's going to take months for the supply/demand imbalance to sort itself out. President Trump's recent meeting with China's president Xi Jinping didn't exactly change anything for the energy industry either. This doesn't necessarily guarantee oil prices and energy stocks will continue moving higher. It's a pretty reasonable bet, however, that they won't be moving much lower anytime soon.

Basic materials

The same Middle East turmoil wreaking havoc on the energy industry is indirectly crimping the supply of other materials and commodities as well. The bulk of the State Street Materials Select Sector SPDR ETF's (NYSEMKT: XLB) 14% gain this year is being driven by gold and, in particular, gold-mining stocks. Gold prices are up about 5% year to date, which doesn't seem like much. After last year's 60% gain following 2024's nearly 30% advance, however, tacking on measurable gains of any degree is pretty impressive.

Image source: Getty Images.

The bullish driver here is the same one that's done most of the work since 2024. That's inflation, and the fear that it may remain uncomfortably high for the indefinite future. See, gold is widely regarded (and rightfully so) as a hedge against inflation. Investors are willing to pay a premium for an instrument that should dampen some of the impact of ever-rising prices.

That being said, it's not just gold that's driving the sector higher at this time. Soybeans, cotton, wheat, and cattle prices are also well up this year as part of a more sweeping trend that may not run into a headwind anytime soon.

Industrials

Finally, largely led by names like Bloom Energy, Vertiv Holdings, Rocket Lab, and GE Vernova, the industrial sector has recently found a great deal of favor with investors. The State Street Industrial Select Sector SPDR ETF (NYSEMKT: XLI) is up about 11% just since the beginning of the year, slightly outpacing the overall market and extending a steady trend that's quietly been in place since 2023.

It's worth noting that most of this bullishness has ultimately -- even if only indirectly -- been driven by the advent of artificial intelligence. GE Vernova manufactures gas turbines that generate the electricity that AI data centers desperately need right now, for instance, while Bloom Energy offers on-premise power-production and energy-storage solutions. Vertiv makes data center cooling equipment. Even orbital launch outfit Rocket Lab is deriving some benefit from AI's foray into space.

AI doesn't necessarily need to remain the big driver for the entire sector, however. Refreshed economic growth could reignite demand for construction equipment, while a restocking of depleted weapons and munitions stockpiles could benefit the defense sliver of this sector. Waste management remains another underappreciated and distinct growth opportunity as well.

The point is, while the group as a whole is doing well thanks to one particular industry, there's a case to be made for not owning a broad sector fund like the State Street Industrial Select Sector SPDR ETF but instead picking and choosing the sector's top individual stocks. This is the only sector of the three where this makes the most strategic sense.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bloom Energy, GE Vernova, Rocket Lab, and Vertiv. The Motley Fool has a disclosure policy.