Investors Shift Away From Tech
A clear sector rotation is unfolding in 2026, with industrial, consumer defensive, and energy stocks leading the broader market higher while technology and other growth sectors lose momentum.
As enthusiasm around artificial intelligence cools, investors are redirecting capital toward so-called “real economy” companies that produce tangible goods and essential services. Industrials alone have contributed 1.36 percentage points to the Morningstar US Market Index’s 0.93% gain through Feb. 18. Consumer defensives have added 0.6 percentage points, while energy stocks have contributed 0.64 points despite their smaller index weighting.
Technology, communication services, consumer cyclicals, and financials have lagged, reinforcing the breadth of the shift.
Industrials Benefit From AI Infrastructure
Industrial stocks have climbed more than 16% so far this year, with Caterpillar (CAT) accounting for 1.9 percentage points, or 12%, of the sector’s performance. Morningstar analysts note that Caterpillar’s generators are increasingly used to power data centers that support AI servers, reshaping investor perception of the company.
GE Vernova (GEV), spun off from General Electric in 2024, has added 1 percentage point to the sector’s return. Analysts believe its sharpened focus and improving end markets could support margin expansion.
Caterpillar
Morningstar Rating: ★★
Fair Value Estimate: $620
Premium to Fair Value: 20%
Economic Moat: Wide
GE Vernova
Morningstar Rating: ★★
Fair Value Estimate: $600
Premium to Fair Value: 36%
Economic Moat: Narrow
Despite strong performance, neither stock is considered undervalued.
Consumer Defensives Gain on Cautious Spending
Consumer defensive stocks have risen 13.3% this year as households gravitate toward value-focused retailers amid slowing spending growth. Walmart (WMT) and Costco (COST) have driven the bulk of the sector’s gains.
Walmart’s 13.7% advance accounts for 2.3 percentage points of the sector’s return. Costco is up 15.7%, contributing 2.1 points. Both companies benefit from scale advantages and loyal customer bases, but Morningstar assigns each a 1-star rating, signaling significant overvaluation.
Strategists seeking more attractively priced options point to Mondelez International (MDLZ) and Constellation Brands (STZ), both rated 4 stars.
Walmart
Morningstar Rating: ★
Fair Value Estimate: $62
Premium to Fair Value: 104%
Economic Moat: Wide
Costco
Morningstar Rating: ★
Fair Value Estimate: $650
Premium to Fair Value: 53%
Economic Moat: Wide
Energy Leads on Oil Price Strength
Energy is the top-performing sector in 2026, rising more than 22% amid a roughly 12% increase in oil prices. Exxon Mobil (XOM) has surged 26%, accounting for about 32% of the sector’s gains. Chevron (CVX) has advanced 21.8%.
Morningstar recently raised Exxon’s fair value estimate to $142 per share following updated 2030 guidance pointing to higher earnings and disciplined capital spending. Chevron is expected to increase production in Venezuela over the next 18 to 24 months while pursuing cost reductions.
Exxon Mobil
Morningstar Rating: ★★★
Fair Value Estimate: $142
Premium to Fair Value: 6%
Economic Moat: Narrow
Chevron
Morningstar Rating: ★★★
Fair Value Estimate: $171
Premium to Fair Value: 8%
Economic Moat: Narrow
Both companies are viewed as fairly valued rather than cheap.
Performance Without Bargains
All six of the leading names — Caterpillar, GE Vernova, Walmart, Costco, Exxon, and Chevron — have posted double-digit returns this year. However, Morningstar analysts caution that strong price appreciation has eliminated most valuation discounts.
The rotation reflects shifting investor priorities toward stability, tangible assets, and cash flow durability. Yet even in favored sectors, opportunities may be limited for value-focused buyers.
