The Industrial Select Sector SPDR Fund (NYSEARCA:XLI) is a popular choice for investors looking to gain exposure to U.S. industrials. This fund holds a wide range of industrial companies in the S&P 500, including aerospace, machinery, railroads, and defense. XLI has delivered solid returns over the past year, returning 24.05% through July 7, 2026. However, a significant portion of the industrial sector rally has been driven by a narrow theme, and XLI may dilute this focus.
On the other hand, the Global X U.S. Infrastructure Development ETF (NYSEARCA:PAVE) takes a more concentrated approach by focusing on companies involved in the physical infrastructure build-out. PAVE has outperformed XLI, returning 28.23% over the past year and 131.44% over five years. This success can be attributed to PAVE’s holdings in companies that benefit directly from the growth in data centers and infrastructure development.
One of the key differences between XLI and PAVE is their exposure to the growing demand for data centers and the aging U.S. power grid. The Department of Energy projects that data centers could consume up to 12% of U.S. electrical demand by 2028, highlighting the need for investment in electrical equipment, utility contractors, and engineering firms. PAVE’s top positions include companies like Quanta Services, Eaton, and Trane Technologies, which are well-positioned to benefit from this trend.
While PAVE offers a more focused exposure to the infrastructure theme, there are trade-offs to consider. PAVE may be more susceptible to fluctuations in AI capex and utility permitting, leading to higher volatility. Additionally, PAVE lacks exposure to aerospace and defense sectors that are included in XLI. Investors looking to make a switch should consider a partial reallocation from XLI to PAVE to maintain some diversification while capturing the upside potential of the infrastructure theme.
In conclusion, both XLI and PAVE have their merits, and the decision to switch between the two will depend on the investor’s goals, risk tolerance, and time horizon. For those seeking exposure to the physical layer of the AI build-out and infrastructure development, PAVE offers a compelling option with a track record of strong performance. However, investors should carefully weigh the trade-offs and consider their individual circumstances before making any changes to their portfolio.
For more information and insights on top AI stocks, readers can refer to the analyst who accurately predicted NVIDIA in 2010. Contact editorial@247wallst.com for any questions or corrections.
