These underperforming groups may deliver AI-electric appeal. Here's why.

Industrial and infrastructure stocks are emerging as a bullish investment theme, driven by reshoring initiatives and the substantial infrastructure and electrification demands of the AI boom, according to analysts like Mike Atkins of ETF Action and Ryan O'Connor of Global X. While AI-focused ETFs have seen significant year-to-date gains, infrastructure-related funds such as the Global X U.S. Infrastructure Development ETF (PAVE) and the Global X U.S. Electrification ETF (ZAP) are demonstrating stronger performance this month amidst volatility in Big Tech, suggesting a potential diversification opportunity for investors.

Analysis

Industrial and infrastructure stocks are emerging as a significant investment theme, driven by a confluence of reshoring initiatives and the substantial infrastructure and electrification demands of the artificial intelligence (AI) boom. Analysts like Mike Atkins of ETF Action and Ryan O'Connor of Global X are bullish on this sector, noting a shift away from globalization that favors domestic industrial products and services.

While the VanEck Semiconductor ETF (SMH), which includes AI bellwethers such as Nvidia (NVDA), Taiwan Semiconductor (TSM), and Broadcom (AVGO), has seen a 42% year-to-date gain, it has experienced monthly underperformance. In contrast, the Global X U.S. Infrastructure Development ETF (PAVE), up 16% YTD, and the Global X U.S. Electrification ETF (ZAP), up almost 24% YTD, have demonstrated stronger performance this month, suggesting a potential rotation into foundational sectors.

PAVE's top holdings, including Howmet Aerospace (HWM), Quanta Services (PWR), and Parker Hannifin (PH), underscore its exposure to critical industrial and construction segments. The emphasis on electrification as a key driver, directly supporting the AI boom, highlights a structural tailwind for companies providing essential physical infrastructure for technological advancement.

Key Decisions for Investors

• Consider increasing exposure to industrial and infrastructure-focused ETFs like PAVE and ZAP, given their recent outperformance and structural tailwinds from reshoring and AI-driven electrification demands.
• Monitor the monthly performance trends of traditional AI bellwethers (e.g., NVDA, TSM, AVGO) for continued volatility, which could indicate a broader market rotation into less growth-dependent sectors.
• Evaluate individual companies within the infrastructure and electrification sectors, particularly those with strong fundamentals and direct ties to supporting the physical demands of the AI industry, for potential long-term strategic allocations.