AI Boom Splits the Market: Best and Worst Sector ETFs of 2025
AI-fueled sectors like tech and utilities are surging, while others are barely in the green.
The S&P 500 has been on a tear this year, but the rally hasn’t been evenly spread. Beneath the surface, there’s a huge divergence playing out among the market’s 11 sectors. All of them are up for the year, yet the gap between the winners and the laggards is enormous.
Based on the performance of the SPDR suite of sector ETFs, gains stretch from barely 1% all the way up to 24%. That massive spread tells the story of 2025’s market. The sectors tied to artificial intelligence are flying high, while much of the rest of the economy is stuck in low gear.
Tech Leads the Charge
Technology sits firmly at the top. The Technology Select Sector SPDR Fund (XLK) has jumped 23.9% this year as the AI boom continues to fuel massive demand for computing power and advanced software.
Nvidia, Microsoft, Broadcom, Palantir, Oracle, and AMD have all soared as demand for AI hardware and software grows insatiably.
Even Apple, which has been criticized for lagging in AI, recently hit new all-time highs thanks to strong iPhone sales.
Powering the AI Revolution
Right behind tech comes one of the biggest surprises of the year: utilities. The Utilities Select Sector SPDR Fund (XLU) has surged 20.9%, driven by an unexpected tailwind from AI’s hunger for electricity.
The sprawling data centers that power large language models and other AI systems consume staggering amounts of energy. That’s turned what was once considered a sleepy, rate-sensitive sector into one of the market’s most exciting growth stories.
Communication Services Joins the Winners
Communication services is the only other sector posting 20%-plus gains. The Communication Services Select Sector SPDR Fund (XLC) has climbed sharply on the back of Meta and Alphabet, both of which are deeply entrenched in the AI ecosystem.
Netflix, XLC’s third-largest holding, has also delivered solid returns. Together, those names have pushed the sector well ahead of the broader market.
Industrials Ride the Infrastructure Boom
Industrials round out the list of big winners. The Industrial Select Sector SPDR Fund (XLI) is up 16.5% this year as companies like General Electric, GE Vernova, Caterpillar, and Eaton ride a wave of investment in energy systems and electrical infrastructure.
Many of these firms are supplying the machinery behind the AI revolution, from turbines and transformers to heavy equipment powering grid expansion and data-center construction.
Another big theme for the sector has been defense. RTX and its peers have benefited from a surge in military spending in the U.S. and abroad, as geopolitical tensions drive strong demand for advanced defense systems and equipment.
Everyone Else Is Falling Behind
Everywhere else, performance has been far more muted. Health care is up just 5.3%, dragged down by steep declines in insurers like scandal-plagued UnitedHealth Group and mounting pressure on drugmakers to cut costs.
Energy is barely positive, with the Energy Select Sector SPDR Fund (XLE) rising only 1.4% amid low oil prices and surging OPEC supply.
Consumer staples are grappling with shrinking margins, shifting consumer tastes, and worries that GLP-1 weight-loss drugs could dent demand for key products.
And real estate remains weighed down by high interest rates and weakness across the commercial property market.
A Divided Market
What’s clear from the data is that sector performance has diverged sharply this year. One side is powered by the AI boom, while the other is struggling to keep up.
The combined weight of technology (35% of the S&P 500), communication services (10%), industrials (8%), and utilities (2%) has been enough to drive the market sharply higher. But beneath the surface, anything outside the AI ecosystem has been lagging far behind. 
