Published: January 2, 2026 | Category: US Stock Market, Industrials, Manufacturing
Industrials OUTPERFORMED every sector in 2025! Reindustrialization BOOM! ๐ญ The industrial sector emerged as the top performer of the year, driven by the powerful confluence of AI infrastructure buildout, reshoring momentum, and defense spending surge. The sector is now being viewed as the “picks and shovels” of the AI revolution.
Charles Schwab upgraded Industrials to “Outperform” in December 2025, highlighting solid fundamentals and the sector’s role as a key beneficiary of AI adoption. The “Industrial Renaissance” is no longer a speculative theory but a technical reality.
#1. GE Vernova (GEV)
2025 Performance Analysis
GE Vernova has delivered one of the most remarkable performances since its spinoff from General Electric in April 2024. The stock surged over 206% over the past year, establishing itself as the primary infrastructure play for the AI revolution. CEO Scott Strazik stated: “Electric power will be critical to unlocking economic growth in the decades ahead.”
The company operates across three segments: Power (gas, nuclear, hydro, steam), Wind (onshore/offshore turbines), and Electrification (grid solutions, storage). With global electricity consumption projected to rise 3.9% in 2025 and 4% annually through 2027, GE Vernova is perfectly positioned to capitalize on the energy transition.
In December 2025, GE Vernova doubled its quarterly dividend to $0.50 and increased share buyback authorization to $10 billion. The company secured multi-gigawatt HVDC grid contracts in India and Germany, deepening its Electrification backlog.
- 2025 Revenue Guidance: $36-37 billion
- 2028 Revenue Target: $52 billion
- 2028 Adj. EBITDA Margin Target: 20%
- Backlog Target by 2028: ~$200 billion
- Electrification Organic Growth: +25%
2026 Outlook
JPMorgan has a $1,000 price target for GE Vernova by end of 2026, implying ~49% upside. Key catalysts include: AI data center power demand, grid modernization ($5 trillion opportunity), and small modular nuclear reactor development. The company is also investing in AI, robotics, and automation to reduce operational costs by an additional 15%.
#2. Amphenol (APH)
2025 Performance Analysis
Amphenol has emerged as the “boring but critical” AI infrastructure play. The company holds the #2 global connector market share with leading position in AI/data centers at 33% IT/Datacenter exposure. Q3 2025 revenue reached $6.19 billion, up 53% YoY, crushing analyst estimates by 11.5%.
The Communications Solutions segment grew an astounding 96.4% YoY in Q3 2025, with 75% organic growth driven by AI infrastructure buildout. Operating margin expanded to 27.5%, up 560 basis points YoY. Management describes AI as a “generational transformation” creating durable pricing power.
Amphenol completed a transformative $10.5 billion acquisition of CommScope’s Connectivity and Cable Solutions (CCS) division, expanding fiber-optic interconnect offerings in AI and broadband markets.
- Revenue: $6.19 billion (+53% YoY)
- Adjusted EPS: $0.93 (beat by 16.5%)
- Operating Margin: 27.5% (+560 bps YoY)
- FY2025 Revenue Guidance: $22.66-22.76B (+49-50%)
- FY2025 EPS Guidance: $3.26-3.28 (+72-74%)
2026 Outlook
Analysts have raised price targets aggressively: JPMorgan $160, Goldman Sachs $154, UBS $152. Citi analysts prefer Amphenol over competitors like TE Connectivity due to its execution capabilities and leading market share in AI/data centers. The CCS integration and continued AI demand are key catalysts.
#3. GE Aerospace (GE)
2025 Performance Analysis
Following the spinoff of GE Vernova, GE Aerospace became a pure-play aviation company and delivered exceptional results. The company benefits from the post-pandemic aviation recovery and major supply constraints in commercial jet production.
Air traffic has steadily firmed, and original equipment manufacturers have struggled to catch up with demand after COVID-related disruptions. This supply disruption has created an elongated cycle of demand for aftermarket companies, benefiting GE Aerospace’s high-margin services business.
- Pure-play aviation focus post-spinoff
- Strong aftermarket services demand
- Commercial aviation recovery tailwind
- Defense segment stability
2026 Outlook
Fidelity notes that major supply constraints in commercial jet production could aid growth for both original equipment manufacturers and aftermarket players in 2026 and beyond. The defense segment provides stability amid geopolitical tensions.
#4. Caterpillar (CAT)
2025 Performance Analysis
Caterpillar, the world’s largest construction and mining equipment manufacturer, serves as the bellwether for global infrastructure spending. The company benefited from massive infrastructure buildouts across the US and globally, driven by data center construction, CHIPS Act fab development, and traditional infrastructure projects.
Farm equipment recovery also contributed, with farmer confidence rising sharply through 2025. The company’s resource industries segment benefited from mining demand driven by energy transition materials.
- Data center construction boom
- CHIPS Act semiconductor fab buildout
- Infrastructure Investment and Jobs Act
- Mining demand for energy transition metals
2026 Outlook
Infrastructure spending is expected to remain robust in 2026, driven by Germany’s โฌ500B infrastructure fund, continued US reshoring, and AI data center physical construction boom. The company benefits from long-cycle infrastructure projects with multi-year visibility.
#5. RTX Corporation (RTX)
2025 Performance Analysis
RTX Corporation (formerly Raytheon Technologies) delivered strong performance driven by a massive $251 billion backlog and surging defense orders. Patriot missile system orders more than doubled amid geopolitical tensions in Europe and the Middle East.
The company operates through Pratt & Whitney (aircraft engines), Collins Aerospace (avionics), and Raytheon (defense systems). NATO countries exceeding 2% GDP defense spending provided a structural tailwind.
- Total Backlog: $251 billion
- Patriot Orders: More than doubled
- NATO Defense Spending: >2% GDP mandate
- Multi-year defense modernization programs
2026 Outlook
Defense spending is expected to surge further in 2026 with NATO >2% GDP commitments and continued geopolitical tensions. US A&D spending on AI is expected to reach $5.8 billion by 2029. The company’s diversified portfolio across defense and commercial aerospace provides stability.
๐ 2026 Industrial Sector Outlook
UBS, Morgan Stanley, BlackRock, Deutsche Bank, and J.P. Morgan are all bullish on Industrials for 2026!
Key 2026 Catalysts
- European Reindustrialization – Germany โฌ500B infrastructure fund
- US Reshoring & Manufacturing Capex – Accelerating investment
- CHIPS Act Fab Construction – Peak phase in 2026
- Defense Spending Surge – NATO >2% GDP commitment
- Energy Transition Infrastructure – Grid modernization buildout
- AI Data Center Physical Construction – Boom continues
Key Statistics
- Industrials +15.7% YTD – #1 sector performance
- Aerospace & Defense: +50% of sector gains
- Grid modernization: $5 trillion opportunity
- Global IB market growth: 8.8% CAGR to 2033
- US A&D AI spending: $5.8B by 2029
๐ง “Picks & Shovels” of the AI Revolution
Industrials are the backbone of the AI infrastructure buildout:
- Power Equipment: Gas turbines, grid solutions, transformers
- Connectors: High-speed interconnects, power cables
- Cooling Systems: Liquid cooling for data centers
- Construction: Fab construction, data center buildout
- Logistics: Freight networks, supply chain equipment
โ ๏ธ Investment Considerations
- Valuation: GEV at ~109x earnings, APH at ~44x (premium multiples)
- Economic Sensitivity: Cyclical exposure to economic downturns
- Tariff Risk: Supply chain disruption from trade policy
- Execution Risk: Large project delays, integration challenges
- Interest Rates: Capital-intensive projects sensitive to rates
This article is for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results. Do your own research before making investment decisions.