3 Key Factors Driving the Strong Performance of Mining ETFs

Metals and Mining Sector Outpaces Broader Market

This year, stocks in the metals and mining sector have delivered impressive returns. The State Street SPDR S&P Metals & Mining ETF has climbed 11% year-to-date as of February 27, 2026, significantly outpacing the State Street SPDR S&P 500 ETF Trust, which has risen just 0.4% in the same period. Over the past year, XME soared 112.3%, while SPY gained 14.5%. What’s fueling this remarkable rally in metals?

Metals: From Cyclical to Strategic Assets

Industry experts at Jefferies highlight a shift in the metals sector, which is evolving from a typical cyclical industry tied to economic growth into a strategic investment area. This transformation is driven by factors such as national security, supply chain control, and geopolitical considerations.

Artificial Intelligence Drives Demand for Metals

The rapid expansion of artificial intelligence (AI) is boosting mining stocks. Investors are moving away from sectors like software and real estate, favoring industries such as energy, materials, and manufacturing, which benefit mining companies.

Recent advances in AI technology have raised concerns about its disruptive potential, particularly in fields like software, finance, and real estate. Startups are releasing AI tools that automate tasks in legal, marketing, finance, and research, causing some market volatility.

Meanwhile, the construction of AI infrastructure—including data centers, power grids, cooling systems, and semiconductor facilities—is fueling robust demand for metals like copper, aluminum, steel, and gold. By 2035, data centers alone could represent nearly 9% of U.S. electricity consumption.

Green Energy Transition Fuels Raw Material Demand

There is a growing preference among investors for companies supplying essential raw materials. As global energy needs rise, governments are accelerating the shift from fossil fuels to renewables like solar and wind. According to J.P. Morgan Global Research, worldwide lithium demand is projected to grow by 16% annually in 2026, driven largely by electric vehicles (EVs), which are expected to account for 58% of new demand. Energy storage systems (ESS) will contribute about 30%, increasing to 36% by 2030.

Geopolitical Tensions Tighten Metal Supplies

The push for clean energy is expected to further increase lithium demand, potentially leading to supply shortages. Other critical minerals, including cobalt, nickel, and rare earth elements, also face limited availability.

J.P. Morgan Global Research forecasts a 2.6% annual increase in global copper demand. This rising demand, combined with supply disruptions and shrinking inventories, is likely to keep the copper market tight in 2026. Key factors behind these shortages include concentrated production, slow development of new mines, and geopolitical instability.

Governments are increasingly focused on securing domestic supplies of metals vital for defense, energy transition, and infrastructure. Jefferies analysts note that sanctions and stockpiling are driving up scarcity premiums and reducing miners’ capital costs.

Ongoing trade tensions and export controls, particularly between the U.S. and China, are intensifying resource nationalism, making mining assets more critical for national economic security.

Key Mining-Focused ETFs to Watch

Given these trends, investors may consider mining-related exchange-traded funds (ETFs) such as the VanEck Rare Earth and Strategic Metals ETF and the iShares MSCI Global Metals & Mining Producers ETF.

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• State Street SPDR S&P 500 ETF Trust (SPY): ETF Research Reports
• State Street SPDR S&P Metals & Mining ETF (XME): ETF Research Reports
• iShares MSCI Global Metals & Mining Producers ETF (PICK): ETF Research Reports
• VanEck Rare Earth and Strategic Metals ETF (REMX): ETF Research Reports