Protecting Your Portfolio From the AI Bubble: 3 Dividend-Focused ETFs to Consider

The Tech Concentration Problem

The stock market’s recent surge has been largely driven by artificial intelligence enthusiasm, inflating valuations across the board. The S&P 500, traditionally viewed as a diversified and relatively secure investment vehicle, has become increasingly weighted toward technology stocks. This concentration raises a valid concern for conservative investors: what happens if the AI bubble bursts?

While many investors are drawn to growth-focused index funds, there’s a smarter alternative—diversified ETFs that deliberately limit technology exposure while still delivering solid returns and consistent dividend income.

A Better Path: Three AI-Resistant ETF Options

If you’re looking to balance growth with stability, three exchange-traded funds stand out for their ability to weather potential market turbulence while maintaining strong dividend yields:

State Street Consumer Staples Select Sector SPDR ETF (XLP) – The Defensive Choice

For investors seeking zero technology allocation, consumer staples offer the ultimate protection. This ETF focuses exclusively on companies selling everyday essentials—from groceries to household goods—businesses that thrive regardless of economic cycles.

The fund’s top holdings—Walmart, Costco Wholesale, and Procter & Gamble—are established blue-chip companies with proven resilience. Together, these three stocks represent approximately 29% of the portfolio. The real advantage? The 2.7% dividend yield substantially exceeds market averages, and if panic selling does occur, defensive stocks typically attract capital flows seeking safety.

Performance metrics: The fund trades at a low 0.08% expense ratio and has delivered modest but steady returns. While year-to-date gains may appear modest, the combination of dividend income and potential upside from a flight-to-safety dynamic makes this a compelling hedge.

Invesco S&P 500 Revenue ETF (RWL) – The Unconventional Approach

Rather than following the traditional market-cap weighting methodology, this ETF allocates based on company revenue. The result? A dramatically different portfolio composition that naturally excludes AI darlings like Microsoft and Nvidia.

Instead, you’ll find Walmart, McKesson, and UnitedHealth among top holdings. Healthcare dominates at 21% of allocations, while technology comprises just 12%—a stark contrast to many broad-market funds. The ETF has delivered 17% year-to-date returns with a 1.3% dividend yield.

The 0.39% expense ratio is marginally higher than competitors, but the reduced technology exposure justifies the cost for cautious investors.

Vanguard High Dividend Yield Index Fund ETF (VYM) – The Balanced Alternative

This fund strikes a middle ground between diversification and dividend generation. With 566 holdings, it provides substantial diversification across sectors while emphasizing income-producing stocks.

The current 2.4% yield is more than double the S&P 500’s 1.1% average. Financial stocks represent 21% of holdings, with technology contributing just 14%—meaningful exposure without excessive concentration. Broadcom is the largest single position at approximately 9%, but it’s notably the only tech stock among the top five holdings.

Key advantage: A negligible 0.06% expense ratio makes this an economical choice for long-term dividend collectors. Year-to-date performance of 13% demonstrates solid appreciation without excessive volatility.

Why These ETFs Provide Bubble Insurance

Each of these funds operates on a fundamental principle: quality over momentum. They shift focus away from speculative valuations and toward tangible revenue, cash flow, and dividend payouts. If AI enthusiasm eventually corrects, investors typically migrate to companies with proven earnings power and reliable income streams—exactly what these three ETFs deliver.

The diversification benefit cannot be overstated. While the broader market remains concentrated in technology, these funds deliberately spread risk across multiple sectors and hundreds of individual stocks, reducing the impact of any single market downturn.

Final Considerations

Conservative investors don’t need to accept the risk of AI-driven market concentration. By strategically allocating to dividend-focused, low-tech-exposure ETFs, you can participate in market growth while maintaining a genuine hedge against potential bubble deflation. Whether you prioritize defensive staples, unconventional revenue-based weighting, or balanced dividend generation, these three options offer practical, low-cost pathways to more resilient portfolio construction.