This is Wells Fargo's most favored sector beyond just Technology

Investing.com -- Wells Fargo strategist Scott Wren said in a note Thursday that the current market rally extends far beyond artificial intelligence, highlighting sectors likely to benefit from massive infrastructure and energy investments tied to AI growth.

Industrials and Utilities are the sectors in question. Wells Fargo noted that “long before artificial intelligence captured the daily financial-market headlines, the U.S. power grid was in dire need of upgrading in many, if not most, areas of the country.”

Wren believes those long-overdue upgrades have now become urgent as AI-driven data centers put new strain on electricity demand.

“These power-hungry data-processing structures have been a game changer,” he stated, “forcing the power-grid upgrade debate, that we all knew had to occur, to the forefront of many states’ political and national industrial agendas.”

According to the Wells Fargo strategy, “our favored sectors beyond just Technology, such as Industrials and Utilities, are also set to benefit.”

Wren argued that companies in these areas will be responsible for building new data centers, upgrading transmission systems, and supplying the power needed to sustain AI infrastructure.

Citing research from McKinsey & Company, Wells Fargo said roughly $7 trillion is expected to be spent by the end of the decade on “data centers, computing power, and semiconductors.”

The note also pointed to Blackstone’s estimate that “for every $1 spent on AI, another $3 will be spent on the supporting infrastructure.”

“We are now only in the early innings of what in our view is a longer-term secular trend,” Wren added, calling the coming decade a transformative period for both Industrials and Utilities.

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