Metal and mining stocks are shining bright this year, withState Street SPDR S&P Metals & Mining ETF (XME Quick QuoteXME - Free Report) gaining 11% so far this year (as of Feb. 27, 2026), clearly outperforming State Street SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report) (up 0.4% so far this year). Over the past one year, XME has surged 112.3%, beating SPY (which is up 14.5%). Let’s find out the reason behind the metal rally.

According to Jefferies analysts, the sector is evolving from a traditional cyclical play tied to industrial growth into a strategic investment linked to national security, supply control, and geopolitical influence, as quoted on Yahoo Finance.

AI Boom: A Great Growth Engine

Mining stocks are benefiting from the artificial intelligence (AI) boom. Investor rotations away from asset-light sectors such as software and real estate toward energy, materials, and industrial production have strengthened demand for mining exposure.

AI disruption fears hit software, financials, and real estate stocks in recent weeks. Recent releases from AI startups have intensified concerns about the disruptive impact of AI. The startups introduced tools capable of automating tasks in legal, marketing, finance, and research functions (read: AI Scare Back in the Market: ETFs That Stayed Steady).

At the same time, the rapid build-out of AI infrastructure — including data centers, power systems, cooling equipment and semiconductor manufacturing — is driving strong demand for metals such as copper, aluminum, steel and gold. By 2035, data centers could account for nearly 9% of U.S. electricity demand, per J.P. Morgan.

Demand from Green Energy Areas

Investors are increasingly favoring ownership of companies that produce critical raw materials. As energy consumption continues to rise, many governments are prioritizing the shift from non-renewable fuels to renewable sources such as solar and wind power. J.P. Morgan Global Research expects global lithium demand to increase 16% year over year in 2026, thanks to electric vehicles (EVs), which are projected to account for about 58% of incremental demand, while energy storage systems (ESS) will contribute roughly 30%, rising to 36% by 2030.

Supply Constraints of Metals Due to Geopolitics

With the expansion of green energy adoption, lithium demand is set to grow further, resulting in a likely market supply deficit. Critical minerals such as lithium, cobalt, nickel, and rare earths face supply scarcity too.

According to J.P. Morgan Global Research, global copper demand is expected to rise 2.6% year over year. Increased demand, clubbed with supply disruptions and reduced global inventories, is expected to keep the copper market tight in 2026, per J.P. Morgan. Supply shortages are mainly driven by concentrated production, slow mining development, and geopolitical tensions.

Governments worldwide are prioritizing domestic access to metals essential for defense, energy transition, and infrastructure development. Jefferies analysts note that sanctions and inventory accumulation create scarcity premiums and lower miners’ cost of capital, as quoted on Yahoo Finance.  

Note that export controls between the United States and China and the trade tensions between the duo point to growing resource nationalism. As a result, mining assets are increasingly viewed as important in national economic security.

ETFs in Focus

Against this backdrop, investors can play mining-based exchange-traded funds (ETFs) like VanEck Rare Earth and Strategic Metals ETF (REMX Quick QuoteREMX - Free Report) and iShares MSCI Global Metals & Mining Producers ETF (PICK Quick QuotePICK - Free Report) .