MarketsJul 15, 2026
Industrial Staples Are Becoming the Picks-and-Shovels Play for the Robotics Boom
Market Shifts
Rhea Lobo
Discover
US manufacturing has now expanded for six straight months, and money is starting to move into parts of the industrials sector that investors largely ignored for years.
The ISM Manufacturing PMI registered 53.3% in June, the longest stretch above 50 since late 2022. That's the data backdrop behind what looks like a cycle inflection in industrials.
The sector spent the last four years fighting a three-front war. Higher interest rates cooled capital spending. Tariff uncertainty rattled supply chains and a prolonged inventory hangover from the pandemic suppressed earnings across the board.
The passage of the One Big Beautiful Bill Act recently removed one more obstacle, giving companies the policy clarity they had been waiting on before committing to large projects, according to Tema ETFs fund manager Chris Semenuk.
Commercial and industrial loans outstanding are rising. Industrial manufacturing capacity is trending higher. Both signal that more factories are coming online.
Industrials are now the third-best-performing sector in the S&P 500 this year, up 16.1% through mid-July. But most of those gains have concentrated in a handful of familiar names.
Caterpillar, GE Vernova, and Vertiv Holdings have led the charge, but Semenuk argues the better opportunity sits one layer down.
Makers of bearings, fasteners, pneumatics, and other manufacturing components have been largely left behind, even as demand for their products is set to accelerate sharply.
Morgan Stanley analyst Adam Jonas recently flagged bearing makers as picks-and-shovels plays for the robotics economy.
Bearings carry low substitution risk as every robot needs them regardless of design. Morgan Stanley projects annual bearing sales tied to robotics will rise from roughly 200 million units in 2025 to more than 40 billion units by 2050.
"There is now a uniform effort to reindustrialize the US. That train has left the station."
Chris Semenuk, Tema ETFs
Companies like Fastenal, Parker Hannifin, RBC Bearings, Ingersoll Rand, and Timken supply the behind-the-scenes components powering US manufacturing.
Semenuk holds these names, along with Gates Industrial, Cognex, Terex, and Schaeffler AG, in the Tema US Manufacturing and Reshoring ETF.
Nicholas Colas of DataTrek adds a valuation angle. While industrials trade at elevated multiples relative to history, he argues they offer a more durable AI-adjacent bet than semiconductors.
Unlike semis, their role in the data center ecosystem extends well beyond the next hardware upgrade cycle.
For investors who want broad exposure, the Industrial Select Sector SPDR Fund holds 84 positions across the S&P 500's industrial names and has returned 24% over the past year.
Its top holdings include Caterpillar at 7.74% and GE Aerospace at 6.85%. The fund trades at a 30 P/E, reflecting how much growth expectation is already priced in.
The Global X US Infrastructure Development ETF takes a narrower approach. It returned 28% over the past year and 131% over five years versus's 93%. Its top positions tilt toward electrical contractors and power equipment suppliers.
The tradeoff is higher volatility: fell 4.2% in one recent week, compared with a 1.5% decline for, showing how a narrower focus can amplify moves in both directions.
UBS identified eight industrial stocks with more than 20% upside in a May note to clients. Despite Semenuk's argument, UBS believes GE Vernova carries a $1.4K price target implying 35% upside, driven by what it calls an electrification supercycle tied to AI demand.
Quanta Services carries a $900 target and 24% upside on continued grid and data center investment. Advanced Drainage Systems tops the list at 54% implied upside, though its thesis is more tied to housing recovery than AI infrastructure.
The manufacturing data, the robotics buildout, and the infrastructure capex cycle are all pointing in the same direction. The gains so far have been concentrated. The argument now is that the catch-up trade in industrial staples has not fully priced in what the next few years actually require.
