It’s energy, not technology, that’s generating the best returns this year, and that’s been particularly true recently.

Technology’s underperformance may surprise you, given how often the media writes about artificial intelligence and how it’s on track to disrupt everything from manufacturing floors to store shelves to battle fields.

Yet, that’s always been a Wall Street truth: Once everyone is talking about it, the easy money has already been made.

Consider just how significantly the SPDR Technology ETF (XLK) has lagged other sectors since the summer.  It’s been essentially flat since June 30, while the SPDR Energy ETF (XLE) has gained 29%, bringing its year-to-date return to a rather remarkable 55.4%.

And look at the magnificent seven.

None of them (Nvidia, Microsoft, Apple, Alphabet, Tesla, Meta, and Amazon) is among the top 20 S&P 500 performers over the past 13 weeks.

Mag 7 takes a back seat

In 2022, when Nvidia (NVDA) surprised everyone with a massive beat-and-raise quarter that kicked off the AI cloud spending boom, nobody was talking about AI, and few had any idea who would likely be the biggest players.

Following a bear market drubbing, many were still shunning technology stocks, afraid of aftershocks. It took over a year for most to truly begin to believe AI spending would be durable or ultimately prove profit-friendly, and stock market returns could continue climbing.

Read More: Cathie Wood sells $16 million of surging tech stock

The result? Nvidia became a $5.1 trillion company that accounts for 7.4% of the S&P 500 on its own, and altogether, the mag 7 represent over one third of the benchmark.

This year, the backdrop is different. Just about everyone knows about AI, thanks to using Gemini, ChatGPT, or Claude at home or work. And most investors own the biggest AI players, including hyperscalers (Amazon, Microsoft, Alphabet) and picks-and-shovel providers, including AI chip darlings Nvidia, Micron, AMD, and Broadcom.

With so few still left on the sidelines to buy those stocks, it’s little wonder the mag 7 has taken a back seat to other stocks recently, including over the past few days. On October 22, the Roundhill Magnificent Seven ETF (MAGS) fell 3.4% while the less-tech-heavy State Street SPDR Dow Jones Industrial Average ETF Trust (DIA) was up 0.4%.

“If you own semis or any of the Mags, it’s been a really ugly week. But if you own the others, you’re probably enjoying this market for the first time in ages,” wrote Helene Meisler on TheStreet Pro.

The S&P 500’s best performing sector this year is energy, not technology.

Puneet Vikram Singh, Nature and Concept photographer, / Getty Images

Energy sets the pace as geopolitics ignites crude

Energy has had fits and starts this year, but selling has been short-lived.  Those who have stuck with the basket since the U.S. removed Maduro from Venezuela’s government in January have been rewarded much better than the buy-and-hold AI stocks crowd.

The main reason for energy’s outperformance has been the relentless rise of crude oil amid growing global supply tensions, particularly in the Middle East. Since December, West Texas Crude oil prices have surged to $99 per barrel from about $57 exiting 2025, padding profits at producers less reliant on Middle East oil flowing through the Strait of Hormuz.

Consider ExxonMobil (XOM). The average Wall Street analyst expects it to report third-quarter revenue of $106 billion, up from $85.3 billion in the same period one year ago. Analysts are similarly targeting $4.03 in earnings per share. One year ago, ExxonMobil earned $1.88.

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The situation is similar for Chevron (CVX), which is expected to see revenue surge to $61.7 billion from $49.7 billion last year, and Warren Buffett’s favorite oil stock, Occidental Petroleum (OXY), which is expected to see EPS jump to $1.45 from $0.64 last year in the third quarter.

It’s not just oil exploration and production stocks that are intriguing. Energy service stocks can benefit from uncorking Venezuelan oil fields, and eventually, rebuilding Middle East infrastructure.

Long-time value investor Bret Jensen sees Halliburton (HAL) and SLB (SLB) as two oil services stocks likely to win in that scenario.

“Both of these energy services names should benefit immensely once hostilities in the Middle East finally end. They should garner plenty of additional work to restore production in the region. As well as to rebuild inventories and strengthen energy security, wrote Jensen on TheStreet Pro.

Sector-wide, energy stocks within the S&P 500 will deliver 127.6% more in earnings per share than last year, according to FactSet.

That kind of step-up in sales and profits caught most investors off guard. I wrote in January that this would be the year of energy, given the geopolitical tailwind, especially since oil stocks accounted for just 3% of the S&P 500 index, suggesting they were significantly under-owned by Main Street and Wall Street.

It’s not all bad for tech, but it’s software, not hardware, winning

Looking at the top 20 S&P 500 stocks over the past 13 weeks, there are plenty of information technology stocks represented, simply not the ones you might think.

Instead of mag 7, it’s IT information services stocks like Accenture (ACN) and Gartner (IT), and software stocks like Palantir (PLTR), ServiceNow (NOW), Workday (WDAY), and Salesforce.com (CRM) that are setting the pace.

In late 2025 and early 2026, software stocks took a drubbing amid fears that AI would enable companies to build their own solutions rather than pay for seat licenses for tools like CRM, HR, and finance.

The iShares Expanded Tech-Software ETF (IGV) tumbled 36% from its November high to its April 2026 low, setting the stage nicely for a recovery as ‘existential’ industry fear dissipated. Since June, it’s been a different story. The IGV has risen 20%, with stocks like Palantir, ServiceNow, Workday, and Salesforce up significantly more over the past thirteen weeks.

Within technology, the argument is shifting for investors from how much money is being spent building out data centers with next-gen servers powered by super-fast chips to what companies will actually help businesses figure out how best to exploit AI to pay for all those tokens.

Outside of technology, it’s about what other than the mag 7 makes sense. So far, it’s been energy, but investors shouldn’t count healthcare out. Of the major sector ETFs, The State Street Health Care Select Sector SPDR ETF (XLV) trails only energy since June, returning 13.2%.

Overall, here are the top 20 S&P 500 stocks over the past 13 weeks, based on data from Fidelity as of 10/21/2026:

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