Battery Supply Chain ETFs Outperform AI Stocks in 2025: Why the Shift Matters for 2026

In 2025, a striking divergence emerged between two of the most hyped investment themes: battery supply chain ETFs and artificial intelligence (AI) stocks. While AI-driven tech giants like NVIDIA gained 30% year-to-date, battery-focused ETFs such as the Amplify Lithium & Battery Technology ETF (BATT) surged 66%, and the Global X Lithium & Battery Tech ETF (LIT) climbed 57.23%. This shift reflects a broader realignment in thematic investing, driven by macroeconomic forces, energy transition imperatives, and evolving sector dynamics. For investors, understanding this rotation is critical to navigating the 2026 landscape, where the interplay between AI and energy infrastructure will likely define portfolio outcomes.

The Drivers Behind the Outperformance

The battery supply chain's dominance in 2025 stems from its foundational role in the global energy transition. Lithium, nickel, and copper-key components of electric vehicle (EV) batteries and grid-scale storage-have become essential commodities as nations accelerate decarbonization goals. According to a report by BloombergNEF, global battery demand is projected to quadruple to 4,100 gigawatt-hours by 2030, fueled by 13.68 million EV sales in 2025 alone. This surge has directly benefited ETFs like BATT and LIT, which hold diversified portfolios of miners, manufacturers, and tech firms across the battery value chain.

Conversely, AI stocks, while still growing, faced headwinds tied to their energy-intensive nature. Data centers, which power AI algorithms, consumed 6% of U.S. electricity in 2024 and are projected to triple to 18% by 2030. This escalating demand has strained grid infrastructure, prompting utilities to isolate data center customers in billing practices and raise electricity rates for other consumers. While AI's long-term potential remains robust, its reliance on energy infrastructure has exposed vulnerabilities, creating a natural complementarity with battery supply chain investments.

Sector Rotation and Thematic Investing Trends

The 2025 rotation from AI to battery ETFs underscores a broader shift in thematic investing strategies. Active ETFs like the iShares U.S. Thematic Rotation Active ETF have capitalized on this trend by dynamically allocating to high-conviction themes such as energy transition and infrastructure. Meanwhile, geopolitical tensions-particularly U.S.-China trade dynamics and Middle East instability-have amplified demand for resilient supply chains, further boosting battery metals.

This realignment is not merely cyclical but structural. As noted by experts at Global X, the battery supply chain represents a "physical infrastructure" play, whereas AI is a "digital transformation" theme. The former benefits from tangible, demand-driven growth, while the latter faces sustainability challenges tied to energy consumption. This distinction has led investors to diversify their thematic exposure, balancing AI's innovation potential with the battery sector's material demand.

Implications for 2026: A Balanced Approach

Looking ahead, 2026 investment strategies must account for both the momentum in battery supply chains and the potential recalibration of AI. While AI-related capital expenditures are expected to exceed $500 billion through 2030 according to Nasdaq, some analysts warn of a "deflationary phase" in 2026 due to unsustainable energy costs and regulatory scrutiny according to Reddit. For instance, utilities may impose stricter energy usage caps on data centers, forcing AI firms to invest in on-site battery storage or renewable energy solutions.

Battery supply chain ETFs, however, are poised to remain resilient. The electrification of transportation and grid modernization will continue to drive demand for lithium, nickel, and copper, even as AI's growth moderates. Moreover, innovations in battery chemistry-such as sodium-ion and solid-state technologies-could unlock new markets, further diversifying the sector's appeal.

Strategic Recommendations for 2026

For investors, the key to navigating this landscape lies in thematic diversification. A balanced portfolio might include:
1. Battery Supply Chain ETFs: BATT and LIT offer broad exposure to miners and manufacturers, while niche ETFs like the ProShares S&P Global Core Battery Metals ETF (ION) focus on specific metals.
2. AI-Related ETFs: The Roundhill Generative AI and Technology ETF and the iShares Future AI and Tech ETF provide concentrated access to AI hardware and software innovators.
3. Energy Infrastructure Plays: Utilities and grid operators, which stand to benefit from both AI-driven demand and battery storage adoption, could serve as defensive holdings.

As highlighted by Morningstar, a "core-satellite" strategy-combining low-cost index funds with active thematic ETFs-offers a pragmatic approach to managing volatility while capturing long-term trends. This strategy allows investors to hedge against AI's potential slowdown while capitalizing on the energy transition's enduring momentum.

Conclusion

The 2025 outperformance of battery supply chain ETFs over AI stocks signals a pivotal shift in thematic investing. While AI remains a transformative force, its energy demands and sustainability challenges have created a natural counterbalance in the battery sector. For 2026, investors must adopt a nuanced approach, recognizing that the future of technology is inextricably linked to the physical infrastructure that powers it. By diversifying across these themes, portfolios can navigate macroeconomic uncertainties while positioning for the next wave of innovation.