11 Non-Tech Winners for an AI Stock Blowup

Philip Morris stock trades at a far higher valuation than Altria. Above, tobacco sticks for an electronic cigarette system at a Philip Morris research facility, shown in 2018. (FABRICE COFFRINI/AFP via Getty Images)

Highflying artificial intelligence stocks look increasingly risky, so investors should allocate some money to names that aren’t likely to plunge if the AI trade falters.

The Nasdaq Composite , heavily weighted toward companies that are benefiting from AI—chip makers, Microsoft, Oracle , Amazon.com. Alphabet , and Meta Platforms —is down 0.8% over the past week. Some investors are taking profits on stocks that have more than doubled in the past five years, as the market’s focus has shifted to whether the near-term returns on the enormous AI investments made be Microsoft, Oracle, Meta, Alphabet, and Amazon will be high enough to justify current valuations.

It all means that stocks that aren’t highly correlated to the AI trade are sound ideas. Adam Parker, Trivariate Research’s strategist and founder, highlighted some examples. He screened for stocks that have a correlation of 20% or lower with his basket of AI stocks and that are up at least 10% in the past six months.

The low correlation means if AI stocks head south, these stocks won’t necessarily drop. And the recent gains mean that the stocks on the screen are in favor, reflecting recently strong business performance. The idea is that as long as that continues, the shares can continue to gain, even if AI names falter.

Some companies that made the cut— Johnson & Johnson, the pharmaceutical distributors McKesson and Cencora, eBay, and real estate investment trust Welltower —have recently hit records. Those might be ones to hold on to, not buy more of, for those that are already in them.

Another group hasn’t hit new highs in months, and might have further room to run: Lockheed Martin, CVS Health, the home builder D.R. Horton, the utility FirstEnergy, and Dollar General .

Another is the $110 billion cigarette maker, Altria. It is enduring a long-term decline in demand for traditional tobacco-based goods, but has begun shifting its business into nontobacco offerings, such as on!, a tobacco-free nicotine pouch. Management said on Altria’s July earnings call that the company significantly increased its market share in that category in the second quarter, boosting sales of oral products by 6% from a year earlier to $728 million.

Analysts expect that segment, which still accounts for a minority of revenue, to carry the company’s total sales growth to low single digits for years to come. That could bring growth in earnings per share to around the same rate for that period.

Altria also pays a hefty dividend, which it has been able to increase annually, and finance, for more than a decade. The company’s more than $8 billion in annual free cash flow can cover the just over $6 billion in dividend payments analysts expect for all of 2025. The yield for expected dividends in the coming year is about 6.4%, padding the stock’s potential total return.

Another argument for the stock is that the shares are still cheap. Altria trades for just under 12 times the per-share earnings expected for the next 12 months—half the figure for the S&P 500 and well below Philip Morris’ roughly 20 times.

Philip Morris has proven that it can sustainably grow its smokeless revenue, so as Altria does the same, the stock can continue to rally. It adds up to a stock that could well be worth buying.

Take a look at these stocks. They have nothing to do with AI, and that is a good thing.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com