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.
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.