If the AI Boom Slows Down, History Says This Is the Smartest Way to Protect Your Long-Term Portfolio
The artificial intelligence (AI) market’s breakneck expansion over the past few years sparked a buying frenzy in the sector’s top chip and infrastructure stocks. Those soaring stocks — including Nvidia, Broadcom, and Amazon — propelled the S&P 500 (^GSPC +0.47%) to record highs.
According to Grand View Research, the global AI market could still expand at a 30.6% CAGR from 2026 to 2033. However, the S&P 500 also looks historically expensive at 29 times earnings, and a growing list of challenges — including inflation, fears of rate hikes, and geopolitical conflicts — could trigger a slowdown in AI spending and take down those top stocks.
Image source: Getty Images.
So if you’re worried about an AI slowdown taking a big bite out of your portfolio, you should consider shifting some of your cash into the Schwab U.S. Dividend Equity ETF (SCHD +0.79%), one of the market’s most popular dividend-oriented ETFs.
Why is SCHD a resilient all-weather investment?
SCHD, which holds $112 billion in assets, passively tracks the Dow Jones U.S. Dividend 100 Index. To join that index, a stock must already be included in the Dow Jones U.S. Broad Market Index (excluding real estate investment trusts), have a market cap of at least $500 million, and have raised its dividend annually for at least ten consecutive years.
Schwab U.S. Dividend Equity ETF
Today’s Change
(0.79%) $0.28
Current Price
$35.09
Key Data Points
AUM
$112B
Dividend Yield
2.99%
Expense Ratio
0.06%
Top Holdings
MRK
4.86%
AMGN
4.82%
ABT
4.65%
Those eligible stocks are then ranked by their dividend yields, 5-year dividend growth rates, return on equity, and free cash flow (FCF) to total debt ratio. Only the 100 highest-ranked stocks make the cut, and a single stock’s weight in the portfolio is capped at about 5%. Individual sectors also can’t account for more than 25% of the index.
Therefore, investing in SCHD gives you instant exposure to the 100 strongest dividend-paying stocks on the market for a low expense ratio of 0.06%. Its top holdings include Merck (4.9% of its portfolio), Amgen (4.8%), Abbott Laboratories (4.7%), Coca-Cola (4.2%), and Chevron (4.1%).
Its diversification across multiple sectors makes it a resilient all-weather investment, and a safe place to park your cash if the top AI stocks fizzle out. It has paid a trailing yield of 3.1% over the past 12 months and will continue to reward its patient investors with steady income.
Over the past ten years, SCHD has generated a total return of 243% with reinvested dividends. Past performance never guarantees future returns, but staying invested in this ETF should remain a smart way to protect your long-term portfolio from future market downturns.
Leo Sun has positions in Amazon and Coca-Cola. The Motley Fool has positions in and recommends Abbott Laboratories, Amazon, Amgen, Broadcom, Chevron, Merck, and Nvidia. The Motley Fool has a disclosure policy.
