We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
2 Stocks From Top Growth Sectors to Buy in August for the Rest of 2026
Read MoreHide Full Article
Key Takeaways
Broadcom is backed by AI chip, networking and VMware software demand heading into the rest of 2026.
ETN benefits from AI-driven investment in power management, electrification and data center infrastructure.
July's pullback resets growth sector valuations without changing long-term demand drivers for these picks.
The month of July was turbulent for investors, thanks to growing concerns over whether hyperscalers can sustain record AI infrastructure spending while delivering attractive returns, renewed trade uncertainty and persistent geopolitical risks. Market sentiment deteriorated after Alphabet (GOOGL - Free Report) raised its 2026 capital expenditure guidance to $195-$205 billion from $180-$190 billion, prompting investors to question whether massive AI investments can continue generating attractive returns. The announcement triggered broad profit-taking across AI infrastructure and semiconductor stocks despite another quarter of robust cloud growth and healthy corporate earnings.
Macro Backdrop Supports Growth Sectors
As August approaches, while AI-related names are under pressure, the broader macro backdrop remains constructive. The Federal Reserve left the federal funds rate unchanged at 3.50%-3.75% in July, noting that inflation remains above its long-run target even as economic activity and labor market conditions continue to show resilience. Business investment has also remained healthy, supported by sustained spending on computing equipment, software and AI infrastructure, although higher borrowing costs continue to weigh on interest-rate-sensitive areas of the economy.
Why August Is the Right Time to Reposition Portfolios
With the market entering the second half of 2026, August presents an important opportunity for investors to reassess portfolio positioning. July's pullback has reset valuations across several growth areas without materially changing their long-term fundamentals. As the earnings season progresses and investors look beyond near-term volatility, sectors supported by stable earnings growth, structural demand drivers and continued capital investment are likely to lead the market through the remainder of the year. Identifying these growth sectors, and the companies best positioned to benefit from them, could be key to generating attractive returns in the months ahead.
2 Growth Sectors to Buy for the Rest of 2026
We have identified two growth sectors, Technology and Industrial Products, and two constituent stocks, Broadcom (AVGO - Free Report) and Eaton (ETN - Free Report) , which are best positioned to capitalize on them.
Technology: Broadcom
Technology stands out as the first sector to watch. July's weakness reflected concerns over AI capital spending and valuations rather than deteriorating demand. Enterprise adoption of generative AI continues to accelerate, with cloud providers, semiconductor companies, networking vendors and software firms benefiting from expanding AI workloads. Continued investment in AI infrastructure by hyperscalers, despite near-term investor scrutiny, reinforces the sector's long-term growth outlook.
Among individual stocks, Broadcom is an attractive play, benefiting from strong demand for custom AI accelerators, high-speed networking chips and VMware-driven software revenues, providing multiple growth drivers through the remainder of 2026. Although this Zacks Rank #2 (Buy) stock has slipped roughly 2% month to date amid the broader AI infrastructure-led selloff, its growth outlook remains exceptionally strong. The Zacks Consensus Estimate calls for fiscal 2026 earnings growth of 72.1% on 66% revenue growth, reflecting robust demand across both its semiconductor and infrastructure software businesses.
Sales and EPS Growth Rates (Y/Y %)
Image Source: Zacks Investment Research
Industrial Products: Eaton
Industrial Products emerges as the second compelling opportunity. While AI has fueled unprecedented demand for semiconductors and cloud infrastructure, it is also driving investment in the physical equipment needed to power and operate data centers. Companies supplying electrical equipment, factory automation systems, power management solutions and advanced manufacturing technologies are poised to benefit from this multi-year capital spending cycle.
Eaton stands out as a key beneficiary as utilities and hyperscalers ramp up investments in electrical distribution, grid modernization and power management infrastructure. Although this Zacks Rank #2 stock has declined roughly 15% month to date amid the broader AI infrastructure-led selloff, its long-term fundamentals remain intact. The Zacks Consensus Estimate calls for 2026 earnings growth of 10.6% on 15.9% revenue growth, underscoring continued strength in electrification, power management and AI-driven data center demand. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
2 Stocks From Top Growth Sectors to Buy in August for the Rest of 2026
Key Takeaways
The month of July was turbulent for investors, thanks to growing concerns over whether hyperscalers can sustain record AI infrastructure spending while delivering attractive returns, renewed trade uncertainty and persistent geopolitical risks. Market sentiment deteriorated after Alphabet (GOOGL - Free Report) raised its 2026 capital expenditure guidance to $195-$205 billion from $180-$190 billion, prompting investors to question whether massive AI investments can continue generating attractive returns. The announcement triggered broad profit-taking across AI infrastructure and semiconductor stocks despite another quarter of robust cloud growth and healthy corporate earnings.
Macro Backdrop Supports Growth Sectors
As August approaches, while AI-related names are under pressure, the broader macro backdrop remains constructive. The Federal Reserve left the federal funds rate unchanged at 3.50%-3.75% in July, noting that inflation remains above its long-run target even as economic activity and labor market conditions continue to show resilience. Business investment has also remained healthy, supported by sustained spending on computing equipment, software and AI infrastructure, although higher borrowing costs continue to weigh on interest-rate-sensitive areas of the economy.
Why August Is the Right Time to Reposition Portfolios
With the market entering the second half of 2026, August presents an important opportunity for investors to reassess portfolio positioning. July's pullback has reset valuations across several growth areas without materially changing their long-term fundamentals. As the earnings season progresses and investors look beyond near-term volatility, sectors supported by stable earnings growth, structural demand drivers and continued capital investment are likely to lead the market through the remainder of the year. Identifying these growth sectors, and the companies best positioned to benefit from them, could be key to generating attractive returns in the months ahead.
2 Growth Sectors to Buy for the Rest of 2026
We have identified two growth sectors, Technology and Industrial Products, and two constituent stocks, Broadcom (AVGO - Free Report) and Eaton (ETN - Free Report) , which are best positioned to capitalize on them.
Technology: Broadcom
Technology stands out as the first sector to watch. July's weakness reflected concerns over AI capital spending and valuations rather than deteriorating demand. Enterprise adoption of generative AI continues to accelerate, with cloud providers, semiconductor companies, networking vendors and software firms benefiting from expanding AI workloads. Continued investment in AI infrastructure by hyperscalers, despite near-term investor scrutiny, reinforces the sector's long-term growth outlook.
Among individual stocks, Broadcom is an attractive play, benefiting from strong demand for custom AI accelerators, high-speed networking chips and VMware-driven software revenues, providing multiple growth drivers through the remainder of 2026. Although this Zacks Rank #2 (Buy) stock has slipped roughly 2% month to date amid the broader AI infrastructure-led selloff, its growth outlook remains exceptionally strong. The Zacks Consensus Estimate calls for fiscal 2026 earnings growth of 72.1% on 66% revenue growth, reflecting robust demand across both its semiconductor and infrastructure software businesses.
Sales and EPS Growth Rates (Y/Y %)
Image Source: Zacks Investment Research
Industrial Products: Eaton
Industrial Products emerges as the second compelling opportunity. While AI has fueled unprecedented demand for semiconductors and cloud infrastructure, it is also driving investment in the physical equipment needed to power and operate data centers. Companies supplying electrical equipment, factory automation systems, power management solutions and advanced manufacturing technologies are poised to benefit from this multi-year capital spending cycle.
Eaton stands out as a key beneficiary as utilities and hyperscalers ramp up investments in electrical distribution, grid modernization and power management infrastructure. Although this Zacks Rank #2 stock has declined roughly 15% month to date amid the broader AI infrastructure-led selloff, its long-term fundamentals remain intact. The Zacks Consensus Estimate calls for 2026 earnings growth of 10.6% on 15.9% revenue growth, underscoring continued strength in electrification, power management and AI-driven data center demand. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sales and EPS Growth Rates (Y/Y %)
Image Source: Zacks Investment Research