The industrial sector is "fully powered"! Driven by policy dividends and the AI infrastructure boom, it leads the rise in US stocks
The industrial sector (XLI) has performed outstandingly this year, with an increase of 16%, leading the S&P 500 index to new highs, surpassing the technology and utility sectors. The surge in aerospace capacity, data center construction driven by AI, and investments in power infrastructure have supported this sector. Companies like Boeing and GE Aerospace have reported strong performances, with significant stock price increases. Policy dividends and the "Inflation Reduction Act" are expected to continue supporting the growth of the industrial sector. The Chief Investment Strategist of PNC Asset Management Group stated that the industrial sector still possesses strong momentum
According to Zhitong Finance APP, U.S. stocks have recently been hitting new highs, but surprisingly, the leaders are not the large technology companies. The industrial sector (XLI) has performed remarkably well this year, leading the S&P 500 index to new highs. Data shows that this sector has risen by 16% year-to-date, outpacing the technology sector (13%) and the utilities sector (11%).
The surge in aerospace capacity, data center construction driven by artificial intelligence, and investments in electrical infrastructure have collectively spawned a group of "high-flying stocks" in the industrial sector.
On Tuesday, Boeing (BA.US) reported better-than-expected quarterly earnings, indicating that its recovery process is ongoing. The aerospace giant's stock price has risen 28% year-to-date, second only to AI chip giant Nvidia (NVDA.US) in the Dow Jones Industrial Average. Boeing has become one of the major beneficiaries of President Trump's foreign trade policy. In May, Boeing received its largest-ever order from Qatar Airways and secured a procurement commitment from British Airways as part of the U.S.-U.K. trade framework.
General Electric Aviation (GE.US) recently noted that its overseas orders have driven a surge in engine orders. The company's stock price has risen over 60% this year. In the last quarter, both its revenue and earnings per share grew by more than 20%.
The strong performance of the industrial sector highlights the Trump administration's policy direction to revive manufacturing through foreign trade and domestic incentives—the "Great and Beautiful Act" signed earlier this month, including capital expenditure and tax incentives for industry relocation, is expected to provide ongoing benefits to this sector.
Yung-Yu Ma, Chief Investment Strategist at PNC Asset Management Group, stated, "We believe this fiscal legislation will support strong performance in the industrial sector over the next few quarters." "We think the industrial sector still has strong momentum and has not reached its final stages; it should still be in the mid-stage."
The power demand from AI data centers and grid upgrades have also driven up the stock prices of electrical equipment manufacturers. General Electric Energy (GEV.US) has seen its stock price rise over 90% year-to-date. This gas turbine manufacturer experienced a surge in orders last quarter, primarily driven by strong demand from data centers.
Meta (META.US), Microsoft (MSFT.US), Amazon (AMZN.US), and Google's parent company Alphabet (GOOGL.US) are expected to collectively spend $325 billion by 2025 to continue building AI infrastructure. CFRA research analyst Jonathan Sakraida stated, "The recent pace of data center construction has been astonishing due to the massive spending by large tech companies." "For all of this to happen, the prosperity of the industrial sector is a prerequisite." ”
