Investors are increasingly cautious about the artificial intelligence sector due to recent volatility, prompting a search for alternative investment opportunities. Dan Alpert, managing partner of Westwood Capital, noted that protective measures in trading are currently very affordable, suggesting a defensive strategy as the market sentiment heavily favors AI.
Recent performance data shows significant declines in AI-related sectors, with the Global X Data Center and Digital Infrastructure ETF down over 10%, the PHLX Semiconductor index down around 12%, and the Roundhill memory ETF losing nearly 20%. In response, UBS has compiled a list of 40 buy-rated stocks that offer diversification away from AI, highlighting ten specific companies.
Joseph Parkhill from UBS pointed out that many high-quality operators with defensive characteristics have become undervalued despite maintaining strong fundamentals. The recommended stocks include well-known names such as McDonald's, PepsiCo, Charles Schwab, and S&P Global, alongside software firms like Thomson Reuters and SS&C Technologies, which have shown resilience in their performance.
Notably, Thomson Reuters has increased by over 20% in the past month. Alpert also mentioned that the 2-year Treasury note is another inexpensive protective option, especially if interest rates stabilize or decrease, making it an attractive choice for cautious investors