Analyst who correctly predicted 2025 rally says these stocks will beat tech in 2026

Technology stocks have been all the rage since OpenAI’s ChatGPT launched in November 2022. Since then, hundreds of billions of dollars of R&D have catapulted the biggest technology stocks to new highs, turning them into the biggest and most influential sector in the S&P 500.

That may change in 2026.

Popular analyst Tom Lee, the founder of Fundstrat, has been navigating the market since the 1990s. He’s had a front-row seat to the internet boom and bust, the Great Recession, Covid, and 2022’s bear market, and what he learned has him thinking technology won’t be the best place to park your money this year.

Instead, Lee believes it’s down-and-out energy stocks that ought to be investors’ focus, something that already appears to be happening given recent returns.

While the energy sector spent most of last year in the doldrums, it’s been quietly gaining momentum, and improving money flows have led it to perform much better than technology stalwarts like Nvidia and high-flying Palantir.

For example, the Energy Select Sector SPDR ETF (XES) has quietly gained 32% since September, while Nvidia and Palantir are down 2.5% and 7.7%, respectively.

That news may surprise you, but I’ve seen trends shift many times over my three-decade career tracking markets and advising mutual and hedge fund managers. Once everyone is long an idea, the market often finds another basket to embrace, and, as I wrote earlier this month, this time around it’s energy.

Lee correctly said to buy stocks when they were nearly in bear-market territory last spring, and he remained bullish, despite worrisome cracks in the labor market that sent unemployment surging and sticky inflation due to newly enacted tariffs.

The unemployment rate exited 2024 at 4.4% in December, according to the BLS, up from 4% in January. Meanwhile, the Consumer Price Index rose to 2.7% from 2.3% in April, before most tariffs took effect.

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Yet Lee was unfazed, beating the bullish drum as stocks marched higher.

In 2026, he’s still bullish but expects more volatility than last year, and he thinks technology stocks will hand the baton to energy and basic materials stocks.

In a recent “The Master Investor” podcast, Lee offered more detail.

Lee believes that energy’s losing streak has created a “mean reversion trade” opportunity. The years of underperformance from the sector have increased the likelihood that investors view the basket as undervalued and ready for a sentiment turn.

“Part of it is a mean reversion trade,” continued Lee. “Energy and basic materials have underperformed so badly over the last five years… If you look at their performance over the past 75 years, it’s usually marked a turning point — the level of underperformance.”

• The Energy Select Sector SPDR ETF (XLE) has returned 24.4%.

• The S&P 500 has gained 87%.

• The Technology Select Sector SPDR ETF (XLK) has gained 138%.

Lee also believes that energy and basics could see increased investor interest because of global uncertainty, something we’ve seen pick up again recently with President Donald Trump’s newly announced 10% tariffs on eight European allies.

“I think some of the geopolitical things taking place favor both groups,” said Lee.

In times of increased geopolitical uncertainty, I’ve seen investors turn to value and underperforming stocks to decrease volatility. It doesn’t hurt, either, that energy is typically a strong performer in the late stages of the business cycle, when GDP rises, driving demand and leading investors to expect higher future oil prices.

“I’ve learned oil prices and energy stocks don’t correlate,” said Lee. “Energy stocks price the future levels in oil price. I think we may see weak oil prices or volatility in the near term. But everything from data centers and this shift away from alternatives is going to be putting upside into the future price of oil, and that’s why energy stocks can outperform.”

Related: Venezuela is SLB and Halliburton earnings wildcard this week

Economists and fund managers expect continued AI spending on data centers to tax the existing energy supply, even as solid spending supported by Federal Reserve rate cuts increases economic activity.

Goldman Sachs, for instance, expects GDP to remain healthy in 2026, climbing 2.6%. Longtime veteran fund managerLouis Navellier thinks GDP could grow much more, predicting a 5% increase.

Crude oil has been in retreat since OPEC uncorked production to drive prices lower, pressuring Permian producers who had been threatening its market share. The decline in crude oil prices has dented oil company sales and profit growth, taking a toll on share prices.

To put the decline in perspective, energy represented about 11% of the S&P 500 index in early 2014 but only 3% now.

ExxonMobil, Chevron, and ConocoPhillips, among the biggest oil & gas companies on the planet, are only up 27%, 24%, and 12% from their 2014 peaks, while the S&P 500 has risen nearly 250% over roughly the same period.

Related: Billionaire Dalio sends 2-word warning on markets

However, a subtle shift began to emerge within energy last fall, and what started as a trickle is quickly building into a steady stream.

Oil stocks are climbing, despite oil prices remaining in the doldrums, a move that surprised many, but that was spotted early on by the sector ranking I built for my mutual fund clients back in 2002. Initially, it climbed slowly up the ranking.

Now, energy has been the top-scoring sector in my sector model in two of the past three weeks.

While the typical catalyst for a move is usually hope of improving commodity prices, this time around, growing interest centers on a game-changing resource opportunity: Venezuela.

The removal of Nicolas Maduro and potential restoration of Venezuela’s oil production marks the biggest production opportunity since fracking kick-started the Permian.

Venezuela sits on the world’s largest stockpile of proven reserves, some 303 billion barrels, according to the EIA, and decades of mismanagement mean that oil is ready for the taking.

If E&P companies like ExxonMobil and Chevron are willing to risk it, I believe production growth there will be a huge revenue driver for the sector, particularly energy service stocks tasked with rejuvenating Venezuela’s wells and fields, such asSLB, Baker Hughes, and Halliburton.

Related: Top energy stocks to buy amid Venezuela chaos

This story was originally published by TheStreet on Jan 21, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.