Use these stocks to diversify your portfolio
With valuations sky high for artificial intelligence stocks, investors may want to start thinking of a backup plan, according to Trivariate Research founder Adam Parker. The plan includes making a list of diversified stock ideas outside of AI, particularly because the S & P 500 is heavily weighted in tech and AI-related names. “Our quality-adjusted AI factor now has its highest correlation ever to the S & P500,” Parker wrote in a note Sunday. “It isn’t hyperbolic to say that the S & P500 is an AI factor bet.” Stocks remain near record highs thanks, in large part, to enthusiasm around artificial intelligence. On Monday, the S & P 500 climbed 1.2% in midday trading, following a tumultuous week that still ended with the index in the green. The recent rallies have led some to question whether the AI boom could turn into a bubble . Mohamed El-Erian, Allianz chief economic advisor, called it a ” rational bubble ” on Monday. AI is good for productivity gains, but a lot of money is being thrown at different companies right now, he said. “At the end of the day there are just going to be a few winners, a handful of winners, and therefore some of the investment will result in tears,” El-Erian said in an interview with CNBC’s ” Squawk Box .” Parker still believes AI productivity and a dovish Federal Reserve make for a good outlook for the next three-to-six months. As for comparisons to the dotcom bubble of 1999-2000, there are both relevant and irrelevant contrasts to the current situation, he said. For instance, valuations for mega- and large-cap stocks are nowhere near as extreme now as they were back then, he noted. Plus, capital spending is funded by strong cash flows and not debt, he said. “But, the market is always increasingly anticipatory of pattern recognition, and we doubt we can see six more months of speculation like we have seen recently,” wrote Parker, former chief U.S. equity strategist at Morgan Stanley. “Portfolio hedges, like uncorrelated or diversified longs, and avoiding the most speculative securities seem increasingly prudent.” To find diversifying stocks, Parker looked for those with a low correlation to its AI semiconductors basket. They were also up at least 10% in the last six months, were top-half quality and had a beta less than 1, which means they are less volatile than the market. The names also have a market cap greater than $50 billion. Here are some of the stocks that made the cut. While Walmart has a low correlation to Trivariate Research’s AI semiconductors basket, it is certainly taking advantage of AI within its business. The big-box retailer is turning to AI to optimize the shopping experience . Its latest move came last week, when it announced that shoppers can make direct purchases through OpenAI’s ChatGPT . In August, the retailer reported mixed financial results , with earnings missing expectations but revenue surpassing the consensus estimate. However, Walmart raised its full-year earnings and sales outlook despite contending with tariffs. The company is set to post fiscal third-quarter earnings next month. Shares have gained about 18% year to date. Meanwhile, Netflix is scheduled to report its latest quarterly results on Tuesday. Bernstein analyst Laurent Yoon said in a note last week that the popular “K-Pop Demon Hunters” will be key for Netflix’s results. In early October, shares dipped after Tesla CEO Elon Musk urged his social media followers to cancel their Netflix subscriptions because of a show Musk said was carrying out a “transgender woke agenda.” Analysts weren’t concerned about the impact on the stock, which has since recovered. Netflix is up nearly 40% so far this year Lastly, Welltower has rallied more than 40% year to date. The real estate investment trust owns and develops senior housing, skilled nursing/post-acute care facilities and medical office buildings. The aging population, as well as low supply, is expected to be a boon for the senior housing industry . For instance, Bank of America is forecasting margins for the five senior housing REITs — Welltower, Ventas , Sabra , American Healthcare REIT and National Health Investors — to expand ahead of Wall Street’s estimates in 2026 and reach a record high of 39% by 2028, versus the high of 36% expected by the Street. — CNBC’s Fred Imbert contributed reporting. (Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here .)
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