FIDU and the 2026 Industrials Sector: A Strategic Play on AI-Driven Infrastructure Growth

The industrial sector is poised for a transformative 2026, driven by the explosive growth of AI infrastructure. For investors seeking exposure to this trend, the First Trust Industrial Select Sector Index Fund (FIDU) offers a compelling, diversified approach. While FIDU is not a pure-play AI fund, its broad exposure to industrials and energy firms positions it to benefit from the indirect tailwinds of AI-driven infrastructure expansion. This analysis explores how macroeconomic forces, sector dynamics, and strategic positioning align to make FIDU a key player in the 2026 industrial landscape.

AI as a Macroeconomic Catalyst

Artificial intelligence has emerged as a dominant force in shaping economic growth. According to a report by the Equipment Leasing & Finance Foundation, AI-related investment accounted for 40% of U.S. GDP growth in 2025, with a significant portion directed toward cloud computing and data center construction. The data-center infrastructure market, valued at $46 billion in 2024, is projected to grow by 25% in 2025 and maintain momentum into 2026. This surge in demand is fueling demand for industrial equipment, construction, and energy solutions-sectors where FIDU has meaningful exposure.

The Federal Reserve's industrial production index for data processing and hosting has risen sharply, from 113 in 2020 to 156 in 2024, underscoring the structural shift toward AI infrastructure. Meanwhile, AI-driven capital expenditures are expected to sustain economic growth, with real equipment and software investment forecasted to expand 6.2% in 2026. These trends highlight how AI is reshaping industrial demand, creating opportunities for FIDU's holdings in aerospace, electrical equipment, and industrial machinery.

Macroeconomic Tailwinds: Rates, Inflation, and Sector Momentum

The Federal Reserve's policy outlook further strengthens the case for FIDU. As of December 2025, the Fed projects Personal Consumption Expenditures (PCE) inflation to settle at 2.4% by year-end 2026, slightly above its 2.0% target but within manageable bounds. On the monetary policy front, BofA Global Research forecasts two rate cuts in 2026-25 basis points in June and July-which would lower borrowing costs and stimulate industrial activity. A low-rate environment typically benefits cyclical sectors like industrials, which are sensitive to economic conditions and corporate spending.

Analysts project U.S. GDP growth of approximately 3% in 2026, driven by AI-related investment and resilient consumer demand. This growth trajectory, combined with anticipated rate cuts, creates favorable conditions for FIDU's portfolio. The industrials sector is expected to deliver mid-teen earnings growth in 2026, supported by strong demand in aerospace & defense and energy infrastructure. For instance, companies like GE Vernova and Boeing-both held by FIDU-are highlighted for their roles in meeting surging demand for heavy electrical equipment and aerospace products.

FIDU's Strategic Positioning

FIDU's broad exposure to the industrials sector allows it to capture the indirect benefits of AI infrastructure growth. While it does not directly invest in AI-specific technologies like semiconductors or cloud platforms, its holdings include firms that supply critical infrastructure. These include construction companies building data centers, utilities providing power for AI computation, and manufacturers producing equipment for AI-driven industries.

Analyst forecasts for FIDU are bullish. A price target of $102 per share implies nearly 20% upside from current levels, reflecting confidence in the sector's ability to outperform broader markets. The industrials sector outperformed the S&P 500 in 2025, and this momentum is expected to continue in 2026 as AI infrastructure spending accelerates. Additionally, FIDU's low expense ratio and diversified portfolio make it an accessible vehicle for investors seeking to capitalize on the industrial renaissance without overexposure to volatile tech stocks.

Risks and Considerations

Despite the favorable outlook, risks remain. Trade tensions, supply chain disruptions, or a broader economic slowdown could dampen industrial demand. However, the current environment-marked by easing monetary policy and strong earnings growth-mitigates these concerns. Investors should also note that FIDU's performance is cyclical and tied to macroeconomic conditions, making it more volatile than defensive sectors.

Conclusion

The 2026 industrials sector is uniquely positioned to benefit from the AI infrastructure boom, and FIDU offers a strategic, diversified way to participate in this growth. With macroeconomic tailwinds, including rate cuts and sustained GDP expansion, the fund is well-placed to capture earnings growth in aerospace, energy, and industrial machinery. While not a direct AI play, FIDU's indirect exposure to the infrastructure underpinning AI makes it a compelling choice for investors seeking to align with the next industrial revolution.