Ranking the Most Promising Sectors
The Next Decade of Long-term Growth
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By Nikotes, author of Expanse Stocks
Investing is about backing the future, not the past. And right now, as we stand at the beginning of what feels like one of the most transformative decades in modern history, the question isn't whether change is coming but which sectors will ride the wave, and which will get swept away.
The AI market alone is projected to grow by 28% annually through 2030, reaching $830B, while power demand from AI data centers could grow more than thirtyfold by 2035. This is just impressive, and to me, it signals a fundamental shift in how businesses operate and where capital will go.
As long-term investors, weβre buying slices of tomorrow. And one of the most underrated edges in portfolio construction is this: knowing where the structural secular tailwinds are. Not just picking great businesses but placing them in the right arenas to thrive.
With that in mind, I reviewed the major equity sectors from tech to energy, and tried to ask an important question: Which ones are best positioned to compound over the next decade (2025β2035)?
What follows is my attempt to draw a map of the major economic sectors, for the decade ahead (2025-2035), ranking them based on innovation, demographics, capital flows, margin durability, and disruption risk.
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Framework: What Makes a Sector Attractive for the Long Run?
Before we dive into the rankings, let me share how I think about sector analysis. It's not just about growth rates or current valuations. I'm looking for four key ingredients:
Secular tailwinds that compound over time. The best sectors ride demographic, technological, or regulatory waves that don't reverse. Think aging populations for healthcare, or the inexorable march toward digital transformation.
Innovation potential that creates new markets. Sectors where breakthrough technologies can spawn entirely new industries or fundamentally reshape existing ones. AI is improving efficiency but, most importantly, itβs creating possibilities we couldn't imagine a few years ago.
Structural competitive advantages. Industries where the winners build moats that become deeper over time. Network effects, switching costs, regulatory barriers, β¦ These create the kind of sustainable competitive advantages that compound for decades.
Resilience through economic cycles. Great sectors grow in good times and emerge stronger from disruptions. The companies that dominate them treat challenges as opportunities to widen their lead.
With that framework in mind, let's rank the sectors from most to least attractive over the next decade.
Rankings: From Most to Least Attractive
Tier 1: The Engines of Innovation
1. Technology (High Potential) βββββ
This probably isn't a surprise but let me explain why Technology remains the most compelling sector for long-term investors.
The tailwinds are undeniable. North America is projected to lead the AI market through the end of this decade, due to its deep capital concentration and enterprise-grade AI adoption across high-value verticals. But this isn't just about AI, itβs also about the entire digital transformation of the global economy. Cloud computing, cybersecurity, software infrastructure, semiconductors, etc. these are the βpicks and shovelsβ of the modern economy.
What makes Technology special is its self-reinforcing nature. Better chips enable more powerful AI. More powerful AI creates demand for better chips. Software companies use AI to improve their products, which creates more data, which makes AI better. It's a compounding cycle that I don't see slowing down.
The headwinds are real, though. Regulatory scrutiny is intensifying. Valuations are stretched across much of the sector. And there's always the risk of technological disruption. Today's winner can become tomorrow's footnote faster than in any other sector.
But here's what I've learned: betting against technological progress is a losing game. The companies that win in technology often win big and for long periods.
Example opportunities: Microsoft (cloud infrastructure + AI integration), NVIDIA (AI full-stack ecosystem), Taiwan Semiconductor (enabling the entire digital economy)
2. Healthcare (High Potential) βββββ
Healthcare is where demographics meet innovation, and the result is one of the most compelling long-term investment themes I can find.
The demographic tailwind is relentless. Aging populations in developed economies aren't just getting olderβthey're living longer and demanding better quality of life. Healthcare segment is anticipated to grow at a higher CAGR during the forecast period as AI transforms everything from drug discovery to patient care.
But what excites me most is the innovation potential. We're living through a golden age of medical innovation. Gene therapy, personalized medicine, AI-powered diagnostics, β¦ these aren't science fiction anymore. They're reshaping how we think about health and longevity.
The regulatory environment is complex, sure. Drug development is risky and expensive. But that's exactly what creates the moats. The companies that can navigate FDA approval processes, build global distribution networks, and consistently innovate have sustained competitive advantages that are incredibly difficult to replicate.
Example opportunities: Eli Lilly (obesity/diabetes breakthrough drugs), Intuitive Surgical (robotic surgery platform), Danaher (life sciences tools and diagnostics)
Tier 2: The Enablers and The Enduring
3. Industrials (Medium-High Potential) ββββ
Here's a sector that doesn't get enough love from growth investors, but I think that's a mistake.
Industrials is where the energy transition meets infrastructure renewal. The world needs to rebuild its power grid, electrify transportation, and modernize decades-old infrastructure.
The automation and AI revolution isn't just happening in tech companies. It's transforming manufacturing, logistics, and construction. The companies that can help other businesses become more efficient, more sustainable, and more automated are going to do very well.
What I like about quality industrial companies is their recurring revenue models. Once you're embedded in a customer's critical operations, switching costs are high. Many of these businesses have been compounding for decades and show no signs of stopping.
The cyclical nature is the main headwind. Economic downturns hit industrials hard. But that's also what creates opportunities for patient investors.
Example opportunities: Schneider Electric (energy management and automation), Caterpillar (infrastructure and construction), Heico or Transdigm (aerospace and industrial re-engineered parts)
4. Communication Services (Medium-High Potential) ββββ
This sector is really about the digitization of human interaction and entertainment, and I think we're still in the early innings.
The shift to digital advertising continues to accelerate. Streaming is replacing traditional media. Social platforms are becoming commerce platforms. And underneath it all, the infrastructure that connects our digital world keeps getting more critical.
What I find compelling is how the best companies in this sector have built network effects that become stronger over time. More users attract more content creators, which attracts more users. More advertisers attract more users (through better free content), which attracts more advertisers.
The regulatory headwinds are significant, though. Antitrust scrutiny, content moderation challenges, and privacy regulations are all pressure points. And the competitive dynamics can shift quickly. Just ask anyone who owned Netflix stock in 2022.
Example opportunities: Alphabet (search monopoly + cloud growth), Meta (social commerce and VR/AR), Netflix (global streaming platform)
5. Consumer Discretionary (Medium Potential) βββ
Consumer discretionary is where I see the most divergence between winners and losers over the next decade.
The tailwinds are mixed. Traditional sectors like consumer discretionary, even though they're very much tied to the economy, their weight in the index is becoming more diminished. But that doesn't mean there aren't opportunities.
The shift to e-commerce continues globally. Premium brands with strong moats can still command pricing power. And companies that can leverage AI and data to understand consumer behavior will have significant advantages.
The challenge is that consumer preferences can shift quickly, and economic sensitivity remains high. Many consumer discretionary companies are discovering that what they thought were moats were actually just beneficiaries of easy money and stimulus spending.
Example opportunities: Amazon or Mercado Libre (e-commerce platforms), Ferrari or Hermès (luxury goods resilience), Home Depot (home improvement mega-trend)
6. Financials (Medium Potential) βββ
Financials is a sector where I see significant opportunities, but also significant risks.
The opportunities are real. Rising interest rates have been a tailwind for banks. Fintech innovation is creating new revenue streams. And the digitization of payments and financial services is still accelerating globally.
But the headwinds are substantial. Regulatory pressure continues to intensify. Traditional banking models face disruption from fintech companies. And the sector remains highly sensitive to economic cycles and credit risk.
What I like about the best financial companies is their ability to compound capital over long periods. Banks that can consistently generate high returns on equity while maintaining conservative risk profiles can be excellent long-term investments.
Example opportunities: JPMorgan Chase (diversified financial services), Visa (payments network), Berkshire Hathaway (insurance and diversified holdings)
Tier 3: The Cyclicals and The Constrained
7. Energy (Medium Potential) βββ
Energy is probably the most controversial sector on this list, and I get why.
The energy transition is real, but it's also creating massive investment opportunities. Traditional energy companies are generating enormous cash flows and returning capital to shareholders. Meanwhile, the infrastructure needed for renewable energy represents a multi-decade investment cycle.
What many investors miss is that energy transition doesn't happen overnight. We'll need traditional energy sources for decades while we build renewable capacity. And the companies that can navigate this transition while maintaining strong cash generation could be excellent investments.
The volatility and regulatory uncertainty are the main risks. Energy prices remain cyclical, and policy changes can significantly impact returns.
Example opportunities: Exxon Mobil (traditional energy + low-carbon solutions), NextEra Energy (renewable energy leader), Chevron (integrated energy with capital discipline)
8. Consumer Staples (Medium-Low Potential) ββ
Consumer staples used to be the epitome of defensive investing, but I'm increasingly skeptical about the sector's long-term prospects.
The defensive characteristics remain attractive. People need food, beverages, and household products regardless of economic conditions. Many staples companies have built strong brands and distribution networks over decades.
But the headwinds are intensifying. E-commerce is commoditizing many staples products. Private label brands are gaining market share. And changing consumer preferencesβtoward healthier, more sustainable optionsβare disrupting established players.
The growth prospects are limited in developed markets, and emerging market expansion is becoming more challenging as local competitors gain strength.
Example opportunities: Procter & Gamble (premium consumer brands), Coca-Cola (global beverage distribution), Unilever (emerging markets exposure)
9. Materials (Medium-Low Potential) ββ
Materials is a sector where I see pockets of opportunity, but limited sector-wide growth.
The energy transition creates demand for specific materialsβlithium for batteries, rare earth elements for wind turbines, copper for electrical infrastructure. Some materials companies will benefit enormously from these trends.
But the sector remains highly cyclical and commodity-dependent. Many materials companies have limited pricing power and face intense competition from global suppliers.
Example opportunities: Linde (industrial gases for technology and healthcare), Sherwin-Williams (coatings for infrastructure), Freeport-McMoRan (copper for energy transition)
10. Real Estate (Low-Medium Potential) ββ
Real estate faces some of the most significant structural headwinds of any sector.
The shift to remote work has fundamentally changed office space demand. E-commerce growth continues to pressure traditional retail real estate. Rising interest rates have increased financing costs across the sector.
That said, there are still opportunities. Data centers are in massive demand due to AI and cloud computing. Residential rental properties benefit from demographic trends. And some REITs offer attractive dividend yields.
Example opportunities: Prologis (logistics real estate), American Tower (cell tower infrastructure), Realty Income (diversified REIT)
11. Utilities (Low Potential) β
Utilities faces a paradox: massive investment needs but limited growth potential.
The infrastructure requirements for the energy transition are enormous. Power grids need upgrading. Renewable energy capacity needs expanding. Power demand from AI data centers could grow more than thirtyfold by 2035.
But utilities remain highly regulated, with limited pricing power and low returns on capital. The sector is more about stable dividends than wealth creation.
Example opportunities: NextEra Energy (renewable energy transition), Brookfield Renewable Partners (global renewable infrastructure)
Where I'm Placing My Bets
Looking at this ranking, the pattern is clear: the sectors that will compound wealth over the next decade are those riding the biggest structural trends of our time.
Technology and Healthcare dominate because they're where innovation creates the most value. The companies that can harness AI, transform healthcare delivery, or build the infrastructure for our digital future will likely be the biggest winners.
But here's what I keep coming back to: sector allocation is just the starting point. What matters more is finding the highest-quality companies within attractive sectors. A mediocre technology company won't outperform a great industrial company just because it's in a better sector.
The real opportunity for long-term investors isn't trying to time sector rotations. It's identifying the handful of companies within attractive sectors that have the management teams, competitive advantages, and growth runways to compound wealth for decades.
That's where the real work begins. And that's where we can find the kind of investments that define a lifetime of returns.
For more deep-dive analysis on specific companies within these sectors, explore the π Deep Dove Briefs section and the π Portfolio corner of Expanse Stocks, where I share detailed investment cases and ongoing monitoring of our highest-conviction positions.