While investors chase the next AI unicorn, traditional industries like steel mills, railroads, and assembly lines are quietly outperforming tech stocks and broad market indexes. With a YTD return of over 17.3% (as of July 23, 2025), XLI ETF—the Industrial Select Sector ETF—has outpaced the Nasdaq-heavy QQQ and the broader S&P 500 (SPY).
The old-economy stocks generally consist of steady manufacturing, industrials, and energy performers. The industrial sector in 2025 has been subject to significant transformation as the global economic landscape is undergoing a considerable reconstruction, marked by a renewed strategic focus and substantial investment in traditional industrial sectors. Deglobalization due to Geopolitical risk has been a driving force behind the trend to procure locally, helping the old industrial stocks. However, multiple other aspects at play have been acting as the key factor.
Year-to-date total returns show Industrials (XLI) outperforming both Tech (QQQ) and the broader market (SPY) as of July 23, 2025. (Chart by: KoyFin)
New technologies or innovative applications of old technologies in traditional industries, along with the re-prioritization of tangible assets and supply chain resilience, are the foundational elements in an industrial renaissance. The "Growth vs Value" dichotomy should take a backseat as the reindustrialization hinges on the intricate interplay between policy purpose and economic reality. The policies are created to support reshoring or nearshoring; however, their execution faces significant economic tradeoffs. For instance, at the time of low unemployment, the misallocation of labor is a real possibility.
Furthermore, although tariffs are designed to safeguard the interests of domestic manufacturing firms, they can lead to higher consumer prices and a reduction in overall GDP. This situation conflicts between the political attractiveness of "bringing jobs back" and the broader economic implications. The sustained decrease in industrial employment has predominantly resulted from advancements in productivity.
The current industrialization is termed Industry 4.0, driven by key drivers such as IoT and AI, where the technologies are transforming manufacturing processes into a modern outlet with smart factories, predictive maintenance, and mass customization. As a result, we are seeing massive investments in industrial plants that could generate decades of value. These investments are created to utilize the key drivers of industrialization 4.0.
Company | Location | Investment | Project Summary |
Eli Lilly | Lebanon, Indiana | $4.5 B | Advanced R&D and drug manufacturing facility for injectables and APIs |
Natron Energy | Edgecombe County, NC | $1.4 B | Sodium-ion battery gigafactory focused on grid-scale energy storage |
Ford | Ontario (Canada) & U.S. | $3.0 B | Expansion of heavy-duty F‑Series truck production (~100k additional units) |
Novo Nordisk | Clayton, North Carolina | $4.1 B | Injectable obesity drug plant for Ozempic and Wegovy |
Fujifilm | Holly Springs, North Carolina | $1.2 B | Biologics CDMO for antibody and cell culture drug manufacturing |
SK Hynix | West Lafayette, Indiana | $3.87 B | Advanced chip packaging and R&D for AI memory applications |
Scout Motors | Blythewood, South Carolina | $2.0 B | EV plant for all-electric trucks and SUVs (200k unit capacity) |
Corning | Saginaw County, Michigan | $1.5 B | Solar component manufacturing: wafers and modules |
Lake Charles Methanol | Lake Charles, Louisiana | $3.2 B | Low-carbon methanol production (limited public detail) |
Toyota | Georgetown, Kentucky | $1.3 B | EV and battery assembly line expansion |
The Industrial firms are often associated with strong pricing power and steady dividend history, with the rising interest rates hurting the growth stocks, which rely heavily on their borrowing capacity. With the increasing borrowing cost affecting the future cash flows, the debate of Value vs Growth has once again been an area of discussion. This instability has led investors to focus on stocks that invest strongly in tangible assets that pay regular dividends and have asset-backed pricing power.
Increasing interest in these old-economy industries is not just a cyclical event. The Industrial Renaissance is the result of the structural changes in the trends, focusing on key aspects such as national security, decarbonization, supply chain sovereignty, and tangible asset revaluation. It is about time the investors should focus on rebalancing their portfolio toward capex beneficiaries, industrial innovators, and hard-asset-intensive businesses poised to win in a more inflation-sensitive, geopolitically fragmented world.
Forward P/E ratios from 2022 to 2025 highlight a sharp rerating in Industrials, now surpassing both Technology and the S&P 500 in 2025. (Source: YCharts)
The debt market for the software witnessed $27.7 billion deployed across 2,077 loans in Q4 2024, with average interest rates ranging from 9% to 14%, reflecting the high perceived risk. Interest rates are often lower in asset-backed ventures, suggesting a strategic focus on consolidating and optimizing investment in asset-heavy sectors rather than engaging in purely speculative growth plays. The increasing forward PE indicates that the investors are willing to pay more today for each dollar of expected future earnings, expecting stronger future earnings growth.
However, it must be noted that the industrial sector's strong performance does not make it a risk-proof investment option. The investors should focus on key risk aspects such as labor shortages, trade policy volatility, retaliatory tariffs and protectionism, bureaucratic delays, and political gridlock. Therefore, the investors must be shrewd in selecting old-industrial companies that are investing their CapEx smartly and focusing on improving operational efficiency, resilient supply chain, and trying to secure a competitive advantage with their investment strategies, such as investments aligned with Industry 4.0 adoption.
