- The veteran investor noted how energy is the foundation of everything in the market, from data centers and AI infrastructure to shipping and manufacturing.
- According to Noble, the oil service companies are where the real leverage is.
- He called the current market positioning, where investors prefer technology stocks over energy stocks, “absurd”.
George Noble, a veteran investor and a former associate of Fidelity’s Peter Lynch, said on Wednesday that the energy sector is outperforming technology companies, and not just because of the geopolitical climate.
Noble said in a post on X, “The Iran situation poured gasoline on a fire that was already burning,” indicating that the energy sector was simply getting a boost from the war in the Middle East, rather than being propped up solely because of it.
“Energy is outperforming tech by double digits in 2026. And the gap keeps widening,” the investor said.
The Real Leverage
Highlighting the pressure on the energy sector and subsequent surge in energy stock prices, Noble said that while the U.S. and Israel’s war on Iran has inflated energy prices since the start of the week, energy stocks were a good bet even before the geopolitical disruption.
“XLE (State Street Energy Select Sector SPDR ETF) gained 14% in January alone. Offshore backlogs were expanding. Dayrates were climbing. Oil service companies were rallying on improving fundamentals, NOT geopolitical panic,” he highlighted.
The veteran investor noted how energy is the foundation of everything in the market, from data centers and AI infrastructure to shipping and manufacturing.
“The oil service companies are where the real leverage is. These companies have pricing power because the supply of rigs, vessels, and equipment is tight and getting tighter,” Noble said.
Energy Vs. Tech
According to Noble, the current market positioning where investors prefer technology stocks over energy stocks is “absurd”.
He noted how the entire energy sector in the U.S. is about 3% of the benchmark index S&P 500, yet semiconductor giant Nvidia Corp. comprises over 7% of the index’s allocation.
“That's not an allocation. That's a market telling you energy doesn't matter,” he said.
“Oil service companies with real cash flows and a structural supply tailwind versus sky-high valuations betting on a productivity revolution that hasn't shown up in the numbers,” he added.
As per Noble, investors should go long on State Street Energy Select Sector SPDR ETF (XLE) and short State Street Technology Select Sector SPDR ETF (XLK).
“One trade captures the entire rotation. That trade is working. And I believe it has years to run, not months,” he said.
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