Despite some resurfacing risks near the end of 2025 (e.g., inflation, AI-bubble talk, and weakening consumer sentiment), US stocks are on pace for double-digit percentage gains for the third straight year. If you think the bullish momentum can continue in 2026, here are highlights of some of the top sector ideas from Fidelity sector portfolio managers across all 11 sectors.
Communication services
Priyanshu Bakshi, Fidelity® Select Communication Services Portfolio (
Communication services stocks are tracking to be the best performing sector in 2025 thanks mostly to the AI trade, and the evolution of AI is expected to remain the most important driver for this sector in 2026. Despite massive spending in AI over the past 3 years, companies within the communication services sector are working to monetize their AI models to show they can drive revenue growth. In my view, we have yet to witness the full impact of these investments, and the market could be underestimating the long-term positive impact of this technology. Gaming is an example of an AI-related investment theme that I believe is particularly compelling and embodies the primary growth drivers for the sector. Before AI, the development of video games would require large teams of specialists, taking anywhere from several months to several years from concept to finished product. Today, AI is transforming the development and quality of these games, enhancing design and offering more personalized player experiences.
Technology
Adam Benjamin, Fidelity® Select Technology Portfolio (
2025 could be described as the year AI came into full view. I see no prospect of flagging AI spending, given the importance of the technology across the market. Semiconductors played a key role in the sector’s strong performance amid massive spending by hyperscalers on AI infrastructure. I expect the “picks and shovels” that have brought the AI train this far—graphics processing units, high-speed memory, and data centers—to continue to be integral to successive improvements in 2026 and beyond. Spending on picks and shovels should continue, as AI models constantly evolve and require updated equipment to support new capabilities. The flip side of this massive AI spending is that other segments of technology, such as IT services, will likely see reduced capital expenditures, given that they are competing with AI for dollars in corporate IT budgets. Elsewhere, software companies could be at risk of major disruption, assuming AI models increasingly incorporate application capabilities. And valuations remain a concern as technology stocks have far outperformed the broad market for multiple years.
Industrials
Clayton Pfannenstiel, Fidelity® Select Industrials Portfolio (
While industrial stocks might be hindered a bit by a recent US manufacturing slowdown and a sluggish domestic housing market that could dampen the prospects for building products, there remains a huge opportunity among heavy electrical equipment producers (e.g., large gas turbines that can supply enough electricity to power a data center). The US has underinvested in power production for at least several decades, and gas-fired turbines are likely to play a key role in meeting surging power demand while other power generation methods take time to come online. I have also seen major supply constraint in the production of commercial jets, which I believe has the potential to aid the growth of both original equipment manufacturers and aftermarket players in 2026 and beyond. With steadily firming air traffic, original equipment has struggled to catch up with demand after a series of production halts and COVID-related disruption. This supply disruption has created an elongated cycle of demand for aftermarket companies.
Utilities
Pranay Kirpalani, Fidelity® Select Utilities Portfolio (
After nearly 2 decades of stagnant growth, the utilities sector is potentially undergoing a once-in-a-generation structural shift, which could yield a multiyear up-cycle of growth. I expect it will be driven by the electrification of many consumer and industrial products, increasing efforts by US firms to onshore manufacturing, and a proliferation of data-center building to power artificial intelligence applications. This shift is projected to accelerate growth for certain areas within the sector over the next 5 to 10 years, most notably among electric utilities and independent power producers—the segments with the most exposure to these trends.
Energy
Kristen Dougherty, Fidelity® Select Energy Portfolio (
Rising power demand, driven in large part by the build-out of AI-related data centers, could propel power producers and oilfield energy services companies in the years to come (although winter weather factors remain the greater influence near term on the price of natural gas). Plus, I expect more offshore projects to be sanctioned in the coming years, and more pipeline routes to be proposed, with a greater degree of policy support than the industry has experienced in the recent past. One key question for the energy complex is how and when the rising demand for power to support data centers used intensively by AI will drive cash flows across the value chain in energy. Within the upstream segment, higher use of data centers will drive higher demand for natural gas, but that demand will grow over time as the data center build-out evolves. Within oilfield services, many companies are looking to adapt their business model from providing mobile power to a remote oilfield to providing it to a data center. Certain oilfield services firms are well-positioned to provide equipment linked to the growth of natural gas for use in power generation.
Materials
Ashley Fernandes, Fidelity® Select Materials Portfolio (
While the economic outlook may be mixed for 2026, expected rate cuts by the Federal Reserve (in addition to 2025 rate cuts) offer an improving scenario for materials stocks in the new year. I think copper stocks will continue to be the beneficiaries of growth for renewable energy sources and the build-out of electric-power capacity for AI-capable data centers. It’s also an industry where supply is increasingly constrained while demand continues to grow, and the longer-term fundamentals for copper look compelling to me. As far as precious metals go, I am somewhat cautious about gold given the huge recent runup, but I think silver could have some more room to run. The latter has made a slow transition to being viewed more like gold as a store of value, and industrial demand for this metal has risen.
Financials
Matthew Reed, Fidelity® Select Financials Portfolio (
Looking ahead to 2026, I think economic uncertainties will make stock picking key among financials. Certain regional banks with a solid deposit base, a strong network, and superior technology are well capitalized and seem poised for further healthy growth. Alternative asset managers are another group I feel offer fertile ground for stock picking. Since the Great Recession, investors have increasingly been incorporating alternative assets into their portfolios to diversify more effectively. This larger trend favors the group. I think the recent worries about credit in the banking system are unjustifiable, given that the leading private credit firms have no material exposure to the problems that sank some companies in the industry. Thus, I believe there could be good value in the stocks of alternative asset managers that have been mispriced.
Consumer discretionary
Jordan Michaels, Fidelity® Select Consumer Discretionary Fund (
The consumer discretionary sector is diverse enough that it typically offers investment opportunities in any environment. While investors in this sector should keep a watchful eye on how stubborn inflation, potential tariff developments, waning consumer sentiment, and employment risks impact consumers, some industries may be set up for a cyclical lift in 2026. For example, home improvement retailers and furnishings companies could get a further boost if interest rates revive housing. Meanwhile, discount retailers stand to gain as shoppers hunt for value amid relatively higher prices. These companies capitalize on excess and cancelled inventory from full-price retailers, buying it at steep discounts and passing those savings on to increasingly bargain-conscious customers. Importantly, these business models tend to be less economically sensitive than many specialty retailers, which may offer some added resilience if the recent bumpy market environment persists.
Real estate
Steve Buller, Fidelity® Real Estate Investment Portfolio (
Real estate investment trusts (REITs) typically offer a bit more for income-oriented investors but tend to lag the broader stock market when growth-oriented stocks are thriving—which was the case in 2025. In 2026, I see real estate stocks benefitting from valuations that are notably more attractive than other high-growth parts of the market. In particular, I see compelling investment potential among senior housing REITs due to constrained supply and robust demand, the latter of which is being driven by the demographic tailwind of an aging baby boomer population. Plus, potential rate cuts in 2026 should be a positive factor for REITs if it leads to lower long-term rates, because they depend on the affordability and availability of capital for long-term growth.
Health care
Eddie Yoon, Fidelty® Select Health Care Portfolio (
Unclear US government policy direction clouded the health care sector’s outlook in 2025 and may continue to do so in 2026. Tariff and trade concerns, as well as rising health care costs, might also sustain volatility within the sector. Nevertheless, I see areas of opportunity, such as biotech. Here, product innovation could continue to be this sector’s key growth driver in 2026, with upcoming clinical readouts from several biotech firms setting the stage for potential breakthroughs. Also, bioprocessing companies and manufacturers of tools like bioreactors, fuel bags, and cell-culture media that are needed to make complex drugs such as monoclonal antibodies, cell, and gene therapies are another source of potential growth. We’ve seen early signs of a recovery here, including an uptick in orders that I expect will continue through 2026, as well as increased capital spending, nearshoring trends, and policies like the Most Favored Nation rule.
Consumer staples
Ben Shuleva, Fidelity® Select Consumer Staples Portfolio (
I see a more favorable environment for consumer staples in 2026. In particular, alcohol-related companies with strong brand equity and international exposure may be well-positioned to benefit from improving consumption and easing pressure on low- and middle-income households. I am particularly bullish about the distillers and vintners industries, which faced meaningful headwinds in 2025, ranging from declining consumption among younger consumers to the impact of GLP-1 drugs and economic pressure on low- and middle-income households. While some of these challenges are structural, I believe investors have overstated their duration.