MarketsJul 18, 2026
The Anti-AI Trade Is Gaining Ground as Tech Volatility Climbs
Portfolio Hedging
Rhea Lobo
Discover
The AI trade owns your portfolio whether you realize it or not. The Magnificent Seven alone make up nearly a third of State Street's fund, and when you add semiconductors, over 40% of the S&P 500 is tied to the AI theme. That concentration leaves investors increasingly exposed if the trade turns.
The selloff isn't hypothetical. The Global X Data Center and Digital Infrastructure ETF is down more than 10% from a month ago.
The PHLX Semiconductor index has dropped ~12% over the same stretch. The Roundhill Memory ETF has shed nearly 20%.
The volatility isn't random. A record 82% of fund managers in Bank of America's latest survey call the AI trade the most crowded on Wall Street.
The concern is that hyperscalers have spent $234B on capex this year, yet their stocks have barely budged as investors brace for free cash flow to turn negative for the first time in at least two decades.
The anti-AI trade isn't about shorting Nvidia. It's about owning assets that generate returns independent of whether the AI buildout delivers.
Goldman Sachs co-CIO Alexandra Wilson-Elizondo pointed to asset classes like sports team ownership and royalties as examples at the Milken conference.
BlackRock's Jay Jacobs noted that the firm's Core High Dividend ETF has performed well during AI selloffs, with less than 2% holdings overlap with BlackRock's main AI ETF.
"In many ways, that dividend component is antithetical to what we are seeing in the AI space, which is all about reinvesting in their businesses."
Jay Jacobs, BlackRock
The underlying logic is that dividend-paying companies are mature businesses with stable cash flows. They're not pouring billions into GPU clusters, making them structurally less exposed to the AI capex cycle.
UBS published a list of stocks it says offer diversification away from AI. UBS analyst Joseph Parkhill noted that many high-quality companies with defensive traits have fallen out of favor despite resilient fundamentals, leaving them at lower valuations.
Names on the list include McDonald's, PepsiCo, Charles Schwab, S&P Global, and SS&C Technologies.
For investors who prefer ETF exposure, a few categories stand out. Schwab US Dividend Equity ETF carries a dividend yield of 3.30%.
Vanguard High Dividend Yield Index ETF yields 2.30%. Both are flagged by Zacks as tools for reducing concentration risk in tech-heavy portfolios.
On the low-volatility side, iShares MSCI USA Min Vol Factor ETF and Invesco S&P 500 Low Volatility ETF tilt toward healthcare, utilities, and consumer staples.
Morningstar and MarketWatch have highlighted a separate framework called HALO stocks, heavy assets, low obsolescence, coined by Ritholtz Wealth Management CEO Josh Brown. The idea targets capital-intensive companies that AI is unlikely to disrupt.
The top HALO names currently recommended by at least two investment newsletters carry an average dividend yield of 2.7% and an average forward price-to-earnings ratio of 16.9, both more attractive than the S&P 500's 1.3% yield and 22.2 forward P/E.
Most of the list is utilities: Sempra, Essential Utilities, PG&E, WEC Energy Group, PPL, and Eversource Energy all appear.
International equities offer another lever. Mercer Advisors CIO Don Calcagni noted that non-US equity markets carry significantly less technology exposure than US markets. The Canadian market, for example, is heavily dominated by natural resources.
None of the strategists quoted across these reports suggest dumping tech entirely. Calcagni framed the goal as building shock absorbers for inevitable periods when AI struggles as an asset class.
Gene Goldman, CIO of Cetera Investment Management, compared avoiding AI entirely to avoiding the internet in the 1990s, possible in the short run, costly over time.
The practical takeaway is about factor exposure, not elimination. If AI already accounts for more than 40% of a standard S&P 500 index fund, adding even a modest allocation to dividend ETFs, utilities, or international equity meaningfully reduces single-factor risk without abandoning the long-term growth thesis.
