The stock market has experienced robust growth in 2025, with the S&P 500 index rising approximately 17% as of December 22. This annual increase significantly surpasses the typical average gain of around 10%. Notably, three sectors have outperformed the broader index: information technology, communication services, and industrials.
As it stands, the information technology sector, represented by the State Street Technology Select Sector SPDR Fund, has seen a notable increase of 24.9%. Communication services, tracked by the State Street Communication Services Select Sector SPDR ETF, is up 20.5%, while industrials, as measured by the State Street Industrial Select Sector SPDR ETF, has risen by 19.2%.
The considerable surge in the information technology sector can largely be attributed to key players often referred to as the “Magnificent Seven.” Nvidia, the world’s largest company by market capitalization, led the charge with a remarkable rise of 36.8%. Other tech giants such as Microsoft and Apple contributed as well, with increases of 15% and 8.1%, respectively. These gains are further accentuated by the performance of several semiconductor companies, including Broadcom, Advanced Micro Devices, and Micron Technology, all of which are heavily invested in artificial intelligence (AI) technologies.
Analysts remain optimistic about the IT sector’s prospects for 2026, particularly due to the anticipated surge in capital expenditures in AI technology. Goldman Sachs forecasts that spending by major cloud service providers—termed hyperscalers—will soar from $485 billion between 2022 and 2024 to approximately $1.4 trillion between 2025 and 2027. In 2025 alone, spending is expected to reach $527 billion, reinforcing the belief that demand for IT products and services will continue to grow.
In the communication services sector, companies like Alphabet and Meta Platforms have significantly driven performance, with Alphabet’s shares soaring by nearly 64% and Meta climbing 13%. The forecast for this sector remains bullish, as demand for data center capacity is projected to triple by 2030, driven predominantly by AI workloads.
The industrials sector, while benefiting from various manufacturing segments, has seen distinct growth patterns. A notable portion of the growth comes from the aerospace and defense industries, which have thrived under increased global defense spending, largely influenced by U.S. foreign policy. The S&P Aerospace & Defense Select Industry Index has surged 46% this year. Simultaneously, companies specializing in agricultural and heavy machinery are also experiencing gains, with firms like Caterpillar reporting a 61% increase and GE Vernova seeing a staggering 101% rise due to improving market conditions.
Looking ahead, the continued expansion in defense budgets and agricultural innovation suggests a promising trajectory for the industrials sector in 2026. With various national governments committing to multi-year defense spending plans and advancements in farming technologies, the prospects appear favorable for sustained growth.
Overall, the outlook for the information technology, communication services, and industrials sectors suggests that they may continue to lead the market forward into the new year, potentially replicating their impressive performances observed in 2025.
