Amid the S&P 500 AI boom, industries like tech stocks are getting rich

As the creation of AI infrastructure and global geopolitical developments encourage large-scale spending, the old economic sector is gaining attention from investors who oppose the work of technology. The industrial sector of S&P 500 it trades at a price-to-earnings ratio above 30, the level investors typically associate with high-flyers, and a P/E ratio above the industry’s long-term average, which is close to 20.

“If you look [Industrial Select Sector SPDR] XLI from State Street, its valuations are really high compared to the S&P 500,” Cinthia Murphy, director of research at VettaFi, said on the latest “ETF Edge.”

“It’s very high-tech, so the industry has had its time in the sun and it’s gotten a lot of attention,” Murphy said.

The race to build AI data centers in the hopes of reaping lasting business benefits from the rapidly changing digital infrastructure has gripped the corporate world and the tech sector. Alphabetsas part of an earnings report on Wednesday, this year’s capex forecast is $195 billion to $205 billion. The previous guidance was to spend $180 billion to $190 billion.

Estimates by McKinsey & Company suggest that this investment won’t stop anytime soon – with reports indicating that global spending on data centers could reach nearly $8 trillion by 2030. Most of these costs will be devoted to data center infrastructure and IT equipment.

Alphabet warned those spending numbers could rise significantly by 2027.

“AI is a technology game, but nothing happens without infrastructure,” Murphy said. “There’s a core infrastructure that needs to be built, and that’s increased the industry a lot.”

“We’ve just started this building. We’re a few billion dollars into it. Billions of dollars of infrastructure still needs to be built,” said Jensen Huang, Nvidia’s CEO, in a March blog post. “This is becoming the largest infrastructure in human history.”

Most of the projects in the next phases of national data center expansion are expected to take place in rural areas. In order to meet the incredible energy demand associated with data centers, expanding rural power grids may prove essential. The maximum generation capacity of rural electric grids in the US remains relatively limited, on average. Now, there is a push to develop institutions that use up to twenty times their existing capacity, which reinforces the need for companies and the need for industrial support. The demand comes despite growing public opposition to new data center construction, fueled by local concerns surrounding dysfunctional power grids and rising electricity costs.

Building this AI backbone across the US requires new power stations, strengthening high-speed fiber internet, and developing new energy-saving battery technologies. Large amounts of power generation and backup equipment, construction equipment, and electrical installation software all enter the mix as requirements to measure. As a result, manufacturing companies in the machinery and electrical equipment industries, which make up 20.89% and 14.16% of XLI goods, respectively, have increased.

A wormhigh ETF holdings, and GE Vernovathe third largest figure in the industrial index, both up more than 50% this year. The worm is up nearly 160% from where it was two years ago. GE Vernova continues to benefit from bookings related to its AI buildout, while its renewable energy business has been hit by a downturn in the wind power industry, leading to sales this week after earnings despite a $176 billion business backlog at the end of Q2. It wasn’t just the heavyweights who benefited, either. Emerson Electricthe 29th-largest holding XLI, is trading about 20% higher than it was in July 2024, despite a small loss over the past year. Hubbellwhich is a large number of 60, increased by 30% in the two-year period from July 2024.

Within XLI, it is not only the AI ​​boom that supports stock valuation, and a number of other ETF industries have been launched targeting multiple areas within the sector.

“There are more than 60 industry ETFs that fall into that category, and collectively they’ve seen about $23 billion in revenue year to date,” Murphy wrote in an email to CNBC. “Industrials have not only performed well relative to the market, but industrial ETFs have seen a boost in asset accumulation (relative to recent years) as investors focus on the country’s growth associated with the creation of AI infrastructure and [the] aerospace and defense theme.”

Lockheed Martinone of the top 20 stocks in the industrial index, it is part of the defense industry which has been on the rise in defense spending with the US and around the world between many wars. The defense contractor reported quarterly earnings this week that topped earnings and revenue, leading to a post-earnings rally of more than 10% on Thursday. LMT and its peers Company RTX CORP.which is the fourth largest in XLI, both up about 35% last year.

Industrial ETFs are popular in 2026

(Source: ETFdb.com. net flow, year to date)

1. iShares Defense Industrials Active ETFIDEF): $4.4 billion
2. State Street Industrial Select Sector SPDR (XLI): $3.6 billion
3. Rating of the company GlobalX Defense Tech ETFSHLD): $2.6 billion
4. First Trust RBA American Industrial Renaissance ETFAIRR): $2.5 billion
5. Tema Space Innovators ETF share priceNASA): $2 billion

Aerospace and defense companies comprise 25% of the XLI sector’s share and have gained momentum, not only due to the increase in defense spending, but also from the recent popularity of aerospace stocks and the long-term outlook for the space economy. That momentum, however, has ended, as the NASA ETF is down nearly 20% in the past month.

Jon Maier, JP Morgan’s chief ETF strategist, says that in an increasingly digital world, defense and AI development may be linked – a picture that bodes well for industries. “Security and stability are very important, and that will play an even bigger role,” he told ETF Edge.

The traditional aviation sector is also represented in the industrial sector, including Boeing, the top ten XLI, and Delta Air Lines. Delta CEO Ed Bastian recently told CNBC that conditions in his business remain strong, with strong demand for air travel amid strong consumer sentiment that puts up with continued airfares. Delta shares have risen 45 percent in the past year despite rising oil prices currently weighing on airline ratings.

Maier added that since investments are made in high-end industries, it is important to note that a large part of these exchanges of index funds such as XLI do not do anything, which shows the confidence of investors in the horizon of the long-term fund.

“The market is always forward-looking, and that’s exactly what stock value is – a cash flow for future earnings,” he said.

“Floods are coming in [industrials] they were really strong, [at] $17 billion,” noted Maeir, adding the fact that there is also a great interest of investors beyond the industrial sector index. “34% of all flows.[s] are managed continuously.”

Disclaimer