Oil Rally Fuels Energy Sector's Outperformance Over Tech, Challenges 2023 AI Dominance

Zinger Key Points
  • Energy stocks have surged ahead of tech stocks in the last three months, driven by a remarkable rally in crude oil.
  • If crude rises up to $100 or over, it could further challenge the tech's dominance in 2023.

Energy stocks have remarkably outperformed their tech counterparts over the past three months. The driving force behind this surge? A resounding oil rally.

WTI-graded crude oil has experienced a remarkable ascent of over 30% since mid-June.

This dramatic increase can be attributed to a combination of factors, including supply constraints resulting from production cuts by Saudi Arabia and Russia, as well as a robust U.S. economy that has sustained demand for oil.

During the first semester, the Nasdaq 100 index, represented by the Invesco QQQ Trust QQQ, exhibited a staggering 39% increase, marking the best first half of the year since the inception of the index.

Much of this surge was fueled by the artificial intelligence (AI) boom, which catapulted tech stocks to new heights, defying the interest rate gravity.

Nonetheless, during the last three months, the tech-dominated index has displayed a flat performance, suggesting a stalemate in the previously prominent AI-fueled surge that defined the earlier market landscape. In contrast, energy stocks, as monitored through the Energy Select Sector SPDR Fund XLE, have experienced significant upward momentum, rising by 19%.

The largest energy stock — Exxon Mobil Corp. XOM — showcased a similar outperformance over the largest tech stock — Apple Inc. AAPL — over the same time period.

This interaction between the energy and tech sectors could potentially signal a reversal of the trend dynamics that were in play earlier this year.

Chart: XLE Vs. XLK, Exxon Vs. Apple Last 3 Months

Oil To Beat AI?

In this three-month period, AI-related exchange-traded funds (ETFs) have closely mirrored the performance of the broader tech sector, offering little to no hedge against the shifting market trends.

The Global X Artificial Intelligence & Technology ETF AIQ has experienced minimal movement, remaining relatively flat. On the other hand, the First Trust Nasdaq Artificial Intelligence and Robotics ETF ROBT has declined by 8.7%.

In stark contrast, oil-related ETFs have seen substantial rallies. The VanEck Oil Services ETF OIH has surged by an impressive 30%, and the SPDR S&P Oil & Gas Exploration & Production XOP is up by a robust 18%.

Year-to-date performances are still giving tech the lead, but what if oil prices hit $100 a barrel soon?

TickerNameTotal Return (1M)Total Return (3M)Total Return (YTD)P/E (NTM)
OIHVanEck ETF Trust – VanEck Oil Services ETF6.40%30.43%18.53%14.9x
XOPSPDR Series Trust – SPDR S&P Oil & Gas Exploration & Production ETF1.52%18.31%12.13%9.0x
XLEThe Select Sector SPDR Trust – The Energy Select Sector SPDR Fund3.94%17.17%7.57%12.2x
CRAKVanEck ETF Trust – VanEck Oil Refiners ETF7.58%15.10%14.58%7.5x
QQQInvesco QQQ Trust, Series 13.68%1.06%39.85%24.7x
AIQGlobal X Funds – Global X Artificial Intelligence & Technology ETF4.09%-1.09%39.31%23.0x
XLKThe Select Sector SPDR Trust – The Technology Select Sector SPDR Fund2.84%-1.84%36.92%25.2x
ROBTFirst Trust Exchange-Traded Fund VI – First Trust Nasdaq Artificial Intelligence…1.49%-10.25%17.27%26.3x
BOTZGlobal X Funds – Global X Robotics & Artificial Intelligence ETF0.40%-13.59%24.43%32.8x
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Posted In: Sector ETFsBroad U.S. Equity ETFsNew ETFsETFsAIai etfsartificial intelligenceCommoditiesenergyoil ETFsoil pricetechtech ETFsWTI
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