Will Materials Stocks Repeat Their Strong 2025 in 2026?

Why It Matters

The sector’s double‑digit gains highlight a lucrative hedge against inflation and a proxy for tech supply‑chain health, making it attractive for growth‑oriented portfolios.

Key Takeaways

• Materials ETFs posted 12% three‑month, 22% one‑year returns
• Copper demand rises from AI‑driven GPU production
• Diversified material exposure reduces reliance on precious metals
• FMAT tracks MSCI USA IMI Materials 25/50 Index
• Strong 2025 performance may repeat if supply constraints persist

Pulse Analysis

The materials sector has emerged as a surprising engine of equity returns in 2025, outpacing many traditional defensive categories. A blend of commodity price rebounds, infrastructure spending, and the tech industry's appetite for raw inputs has lifted the entire universe of miners, refiners, and specialty chemical producers. Investors seeking exposure to this tailwind have gravitated toward broad‑based ETFs that capture the full spectrum of material‑intensive businesses, rather than concentrating solely on gold or base‑metal stalwarts. This shift reflects a growing recognition that material inputs are now integral to digital transformation.

Copper, in particular, has become a bellwether for the sector’s health. As graphics processing units (GPUs) and high‑speed memory modules become scarcer, manufacturers are turning to higher‑purity copper to meet the electrical conductivity requirements of next‑generation chips. Simultaneously, AI‑driven data centers and electric‑vehicle powertrains are expanding the metal’s end‑use profile, tightening supply and supporting price premiums. Analysts project that if these technology trends persist, copper demand could outstrip new mine supply for several years, bolstering earnings for miners and related service firms.

The Fidelity MSCI Materials Index ETF (FMAT) offers a low‑cost, diversified gateway to capture these dynamics, tracking the MSCI USA IMI Materials 25/50 Index with an 8‑basis‑point expense ratio. Its recent performance—12.34% over three months and 22.19% year‑to‑date—demonstrates the upside potential of a well‑balanced basket that includes precious metals, construction aggregates, and specialty chemicals. While the sector benefits from secular demand, investors should monitor geopolitical risk, environmental regulations, and commodity price volatility, which can quickly reshape the risk‑reward profile.