The robotics revolution and a broader U.S. manufacturing renaissance could start to lift more industrial stocks
The most widely traded industrials ETF is up about 5% for the year so far.
The next big bottleneck trade might have more to do with bearings than microchips.
As a sector, industrials are off to a strong start in 2026. Over the past few months, investors have shifted their focus from the biggest AI spenders to companies that will play an important role going forward.
As a result, shares of semiconductor stocks and, to a lesser extent, of hot industrials names like Caterpillar $(CAT)$, GE Vernova (GEV) and Vertiv holdings $(VRT)$, have soared. So far in 2026, industrials are the third-best-performing sector among the S&P 500's SPX 11, up a respectable 16.1%, according to FactSet data.
But some analysts see signs that the data center boom is starting to broaden out into a full-fledged U.S. manufacturing renaissance. Recent economic data have helped to support this narrative: The U.S. ISM Manufacturing PMI, a popular barometer of national manufacturing activity, held above 50 for a sixth straight month in June, according to the latest data. That marks the longest stretch that the barometer has spent in expansion territory since late 2022.
Chris Semenuk, fund manager at Tema ETFs, told MarketWatch that standout large-capitalization industrial names like Caterpillar, GE Vernova and Vertiv will continue to climb. But investors can perhaps find better bargains elsewhere in the space. There are several "industrial staples" names that he believes are poised to benefit from a wave of automation-fueled manufacturing growth.
Purveyors of bearings, fasteners, pneumatics and other manufacturing staples should see demand outpace their capacity to easily meet it, potentially leading to bottlenecks similar to what investors are seeing with memory chips.
Companies like Fastenal $(FAST)$, Gates Industrial (GTES), Parker Hannifin $(PH)$, RBC Bearings (RBC), Ingersoll Rand (IR), Terex $(TEX)$, Cognex $(CGNX)$, Schaeffler AG (XE:SHA0) and Timken $(TKR)$ are just a handful of industrial names well-positioned to benefit from a confluence of several key investment themes, including the revitalization of the American industrial base and the rise of robotics and automation. Semenuk owns shares in many of these names in the Tema U.S. Manufacturing & Reshoring ETF WELD, which he manages.
MarketWatch reached out to all of these firms for comment, but hasn't heard back.
"There is now a uniform effort to reindustrialize the U.S.," Semenuk told MarketWatch. "That train has left the station."
"But the U.S. manufacturing and industrial space has essentially been left for dead by investors for the past four years, which is a long time."
Over the past few years, a handful of headwinds have weighed on the industrials space: Higher interest rates dampened the appetite for credit; President Donald Trump's tariffs briefly unsettled the global supply chain; and the long, slow process of de-stocking following a huge run-up in inventories during the COVID-19 pandemic weighed on earnings for years. Finally, many companies were waiting on the final text of Trump's One Big Beautiful Bill Act before moving ahead with big capital projects.
But these obstacles to earnings growth have either started to ease, or - in the case of the OBBBA - have been entirely ameliorated, which means purveyors of industrial staples could see shortages similar to what memory-chip makers have experienced over the past year.
Other leading indicators in the economic data are pointing to a manufacturing revival. Industrial manufacturing capacity has started trending higher.
Commercial and industrial loans outstanding are picking up as well. Both are leading indicators that likely point to continued acceleration in manufacturing activity in the U.S., as more factories come on-line, Semenuk said.
Morgan Stanley analyst Adam Jonas recently published a report for clients, flagging makers of bearings as potential "picks and shovels" plays for the robotics boom. Bearings benefit from low substitution risk - all robots will need them, Jonas said.
And while bearings function like commodities, the U.S. economy is going to need many tens of billions of bearings in the coming years to fuel the "robot economy" as AI makes the jump into the physical world. Morgan Stanley projected annual bearings sales tied to robotics will rise from about 200 million units in 2025 to more than 40 billion units by 2050.
Taking a more short-term view, Nicholas Colas, founder of DataTrek, said large-cap industrials were sitting at an attractive level. While valuations in the space are high relative to history, they offer investors nervous about the semiconductor trade a more sustainable betting option on AI, he said.
"Unlike semiconductors, a group that is currently suffering from AI trade exhaustion, their role in the data center ecosystem will last far longer than the next tech hardware upgrade cycle," Colas wrote in commentary shared with MarketWatch, referring to industrials.
Semenuk said that earnings trends for many industrial firms are only just beginning to recover. As analysts continue to raise their profit forecasts, valuations should ease.
"That is a good enough reason alone to look at the group again, as investors clearly want AI plays with lasting presence in the theme."
Abhirami Shrinivas contributed
-Joseph Adinolfi
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(END) Dow Jones Newswires
July 15, 2026 07:00 ET (11:00 GMT)
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