3 Dividend ETFs to Shield Your Portfolio From the AI Bubble

Sidestepping the Tech-Heavy S&P 500

The artificial intelligence boom has sent valuations skyrocketing, leaving many investors nervous about traditional broad-market funds. With the S&P 500 increasingly concentrated in tech stocks, a potential AI bubble has become a legitimate concern for risk-conscious savers. The solution? Pivot toward exchange-traded funds that offer genuine diversification while keeping technology exposure minimal.

Three ETFs stand out as sensible alternatives: the Vanguard High Dividend Yield Index Fund ETF (VYM), the Invesco S&P 500 Revenue ETF (RWL), and the State Street Consumer Staples Select Sector SPDR ETF (XLP). Each takes a different approach to reducing bubble risk while maintaining attractive returns.

VYM: Dividends Over Growth

For investors prioritizing income stability, the Vanguard High Dividend Yield Index Fund ETF delivers. This fund’s 2.4% dividend yield—more than double the S&P 500’s 1.1%—makes it particularly appealing in uncertain markets. With 566 holdings spread across multiple sectors, the diversification is substantial.

Here’s what distinguishes it: while financial stocks comprise 21% of the portfolio, tech represents only 14% of holdings. Broadcom is the largest position at roughly 9%, yet it stands alone as the only technology company in the top five. The fund has appreciated 13% year-to-date and charges just 0.06% in expenses—negligible compared to the safety it provides against an AI bubble.

RWL: Revenue-Based Weighting Breaks the Tech Dominance

The Invesco S&P 500 Revenue ETF recasts the S&P 500 using a fundamentally different lens. Rather than weighting by market capitalization, it bases allocations on corporate revenue. This structural change produces a strikingly different portfolio.

Microsoft and Nvidia disappear from the top holdings, replaced by Walmart, McKesson, and UnitedHealth. Tech stocks occupy just 12% of the fund, while healthcare leads at 21%. This revenue-focused approach naturally sidesteps the AI bubble trap. The ETF’s 0.39% expense ratio is slightly higher, but justified for investors seeking meaningful tech exposure reduction. Year-to-date performance: up 17%, with a 1.3% yield.

XLP: Zero Tech Exposure for True Believers

Those wanting complete insulation from the AI bubble might choose the State Street Consumer Staples Select Sector SPDR ETF. This fund invests exclusively in consumer staples—the daily necessities that drive recurring revenue regardless of economic cycles.

Walmart, Costco Wholesale, and Procter & Gamble anchor the portfolio at roughly 29% combined weight. These blue-chip names offer both stability and reliable dividends, reflected in the fund’s 2.7% yield. Performance has lagged at under 1% since January, but dividend reinvestment helps offset modest price appreciation. If an AI bubble does burst and investors flee to safety, staples stocks could attract significant inflows, potentially boosting this fund’s appeal. The 0.08% expense ratio keeps costs minimal while providing exposure to consumer brands with durable competitive advantages.

The Takeaway

Each fund addresses the AI bubble concern differently: VYM emphasizes balanced income; RWL uses revenue weighting to escape tech concentration; XLP abandons tech entirely. Selecting among them depends on your risk tolerance and whether you want token tech exposure or none at all.