The stock market’s turbulent start this year may have opened doors to overlooked corners of the market with promising growth prospects. Yet even after a rapid recovery rally, Fidelity portfolio managers say they have continued to find attractive valuations in a variety of market segments.
Investment opportunities amid market volatility
Though the stock market has pulled off one of the fastest-ever recoveries, market volatility sparked by the Iran conflict may have created pathways for investors to add exposure to some promising but overlooked companies. These include hardware, capital goods, and materials companies at the receiving end of increased spending on strategic infrastructure.
“For a long period of time, the marketplace has underinvested in hard assets and capital-intensive businesses while favoring software and asset-light models,” says Daniel Kelley, primary manager of the Fidelity® Puritan® Fund (
Kelley specifically sees increased demand for energy, basic materials, IT hardware, and capital goods. Among the fund’s top holdings, as of March 31, 2026, are chipmakers NVIDIA Corp. (
“Even with the Iran conflict providing a big tailwind, energy and basic materials remain only a small portion of the S&P 500,” Kelley says. Energy’s share of the index increased to 3.6% as of April 15 from 2.8% at the end of 2025. Basic materials stocks increased their share but still remain only about 2% of the index.
Investment opportunities in hardware and materials powering AI
Information technology continues to dominate the US stock market, accounting for 34% share of the S&P 500. Over the past year, the market’s enthusiasm for artificial intelligence (AI) has helped propel the “Magnificent 7” of mega-cap tech companies and the benchmark index to record highs.
With technology leaders announcing plans to invest hundreds of billions of dollars in new AI applications and platforms, Kelley anticipates increased demand for technology hardware, capital goods, and basic materials companies—the picks and shovels of the AI gold rush.
“There’s an existential race among companies, and potentially for countries, when it comes to AI,” Kelley says.
Fund top holdings
Top-10 holdings of the Fidelity® Puritan® Fund (
- 5.48% NVIDIA Corp (
) - 3.33% Apple Inc (
) - 3.15% Alphabet Inc Class C (
) - 2.30% Amazon Inc (
) - 2.13% Microsoft Corp (
) - 1.70% Space Exploration Technology Corp (Private Placement)
- 1.47% Meta Platforms Inc Class A (
) - 1.33% Exxon Mobil Corp (
) - 1.16% Taiwan Semiconductor Manufacturing Co Ltd (
) - 1.10% US Treasury Notes 4% 07/31/30
(See the most recent fund information.)
Investment opportunities from renewed government spending outside the US
This reallocation to hard assets and strategic infrastructure development is also at work outside the US.
The ongoing supply uncertainty sparked by the Iran conflict, on the heels of disruption caused by Russia’s invasion of Ukraine and the COVID-19 pandemic, has shown that many countries are dependent on global imports for energy and other basic materials.
After decades of underinvestment, governments in Japan and across Europe are expected to increase spending on strategic infrastructure to boost self-sufficiency, including access to energy, power generation and distribution, and renewable energy. Potential beneficiaries of this trend have included Germany-based technology company Siemens AG (
“You cannot always rely on the kindness of other countries supplying you with essential commodities without any risk,” says Alex Zavratsky, manager of the Fidelity® International Value Fund (
Recent events are also expected to prompt more governments to bolster their national security by increasing spending on defense technologies, such as drones and missiles.
Investment opportunities in tools, materials, and real assets
Zavratsky adds that the tools and infrastructure tied to power generation, distribution, and data storage offer a different way for investors to participate in the expansion of AI. Artificial intelligence has been a primary driver of the US stock market’s recent expansion, led by a handful of mega-cap tech firms.
For investors exploring new opportunities, there could be value in companies supplying the physical backbone of AI.
“I can’t replicate the Magnificent 7 internationally,” Zavratsky says, “but I can own the companies that sell them the tools and materials they need.”
In the current AI gold rush, this “picks and shovels” approach means investing in power-equipment makers, electrical suppliers, chipmakers, and power-grid operators. Zavratsky says these companies often have business models that differ from headline-grabbing AI software leaders and have delivered steadier earnings over time.
Companies that have illustrated this trend include Rio Tinto Group (
As inflation nudges replacement costs higher, that can influence how the market views companies that own and operate physical assets. Zavratsky believes the market is not fairly valuing what it would cost to build these businesses from scratch. “Construction and materials stocks have come down to valuation levels that may warrant a closer look,” he says.
Fund top holdings
Top-10 holdings of the Fidelity® International Value Fund (
- 3.60% Banco Santander SA (
) - 3.12% Shell Plc (
) - 2.88% Mitsubishi UFJ Financial Group Inc (
) - 2.42% Toyota Motor Corp (
) - 2.37% Roche Holding AG (
) - 2.35% Sumitomo Mitsui Financial Group Inc (
) - 2.19% Lloyds Banking Group Plc (
) - 2.09% British American Tobacco Plc (
) - 1.97% AXA SA (
) - 1.88% Zurich Insurance Group AG (
)
(See the most recent fund information.)
Value investment opportunities in international banks and US health care
Investors may also want to take a closer look at non-US financial services companies, Zavratsky says, which have benefitted from higher interest rates in recent years that boosted lending income and profit margins. Some European banks are generating returns on tangible equity in the 20s, which are higher than those of many large US banks, he says.
Top holdings in the Fidelity® International Value Fund, as of March 31, 2026, include Spain’s Banco Santander (
Analysts use return on tangible equity (ROTE) as a profitability measure that excludes goodwill and other intangibles. Banks across Europe benefited as the ECB's benchmark rates climbed from 0% in June 2022 to as high as 4.5% in mid-2024, boosting interest income even as deposit rates remained at or near zero, generating robust margins and higher profit.
By comparison, US banks have faced pressure to raise deposit rates while also seeing customers move more of their cash into higher-yielding money market funds and Treasurys.
“Faster economic growth and slightly higher inflation are actually positives in my markets outside the US,” Zavratsky says.
US health care is another sector where price-to-earnings valuations have declined, even as earnings expectations have shown signs of improvement, Kelley says.
Pharmaceutical stock valuations declined last year amid public pressure from the US government over drug prices, and yet earnings at these companies could benefit from pipelines of patent-protected medicines. Kelley's fund has held such names as biopharmaceutical company Gilead Sciences Inc. (
“Large pharmaceutical company valuations have de-rated, falling from mid-teens P/E ratios, on average, to single digits even as their expected earnings revisions pick up.”
Investors interested in matching investment ideas to these themes can search for stocks using the Fidelity Stock Screener. You can also search for mutual funds or ETFs that focus on these themes through the Fidelity Mutual Fund Research tool or the ETF Screener.