Over the three years ending in early 2026, the Communication Services Select Sector SPDR Fund (XLC) has rallied by 184%, eclipsing the 155% advance recorded during the 2000 dot-com era. This performance has lifted XLC’s net asset value to a level 39% above its March 2000 peak, marking the strongest three-year showing in the sector’s history. The ETF’s cumulative total return outpaced the broader S&P 500 by more than 80 percentage points during this period, reflecting robust investor appetite for communication-services and digital-media exposure.

XLC’s surge has been led by its two largest constituents, Meta Platforms and Alphabet. Since the sector’s 2022 lows, Meta has delivered a 588% return and Alphabet has risen 259%. Together, these names account for roughly 45% of XLC’s weight. Meta’s advertising revenue rebound—driven by AI-enhanced personalization and video monetization—and Alphabet’s cloud-infrastructure growth and search-ad market share gains have been the primary catalysts underpinning XLC’s record rally.

In 2025, Wall Street analysts issued more upgrades to communication-services and tech-adjacent names than in any prior year. Within XLC, the three most upgraded stocks were Alphabet (120 upgrades), CrowdStrike (114 upgrades) and Snowflake (110 upgrades). Consensus price targets imply upside of roughly 15% for Alphabet, 20–22% for CrowdStrike and 25–28% for Snowflake over the next 12 months. This wave of positive revisions underlines growing confidence in XLC’s core holdings, particularly around AI deployments, cybersecurity innovation and cloud-data analytics.

With XLC trading near multi-decade highs, investors face a balance between capturing continued momentum in communication services and managing valuation risk. The fund’s sector-leading exposure to digital-advertising, social media and cloud infrastructure positions it to benefit from ongoing AI commercialization and high-growth IT spending. At the same time, the ETF’s concentration in a handful of mega-caps warrants vigilance on earnings delivery and regulatory developments, as either could quickly alter market sentiment.