Shoring up a portfolio with defensive stocks typically means buying stable names from seemingly boring categories: Consumer staples, utilities, medical devices. These days, you can just buy Apple stock instead.
Whether by design or by luck, Apple's relative inaction on artificial intelligence has made it the ultimate hedge in a market driven by AI investments. And as investors grow wary of ballooning capital outlays elsewhere in Big Tech, the iPhone maker's stock has proven its worth.
Apple hit an all-time high of $316.22 on Thursday after a quiet and steady long-term climb. Shares are up 15% this year and 48% in the last 12 months -- first and second in the Magnificent Seven, respectively -- outpacing both the Nasdaq Composite and the S&P 500.
"No one admits they like or want to buy more AAPL," Mizuho Securities analyst Jordan Klein wrote Friday. "But I get why more folks [are] looking at AAPL as a hedge or long idea."
Apple didn't respond to Barron's requests for comment.
The story of the tech market over the last two years goes something like this: AI labs like Anthropic and OpenAI need data centers; hyperscalers like Oracle and Amazon.com are investing historic sums to provide them; and that money is going to chip and server makers, memory and storage suppliers, and a host of other companies.
Apple doesn't fit neatly into any of those categories. It doesn't have a frontier AI model, a sprawling cloud business, or much in-demand hardware. Instead, it is carving out a lower-cost niche as a leader in "edge AI," which involves embedding AI applications directly on its devices, with the help of Broadcom chips.
Analysts estimate Meta Platforms, Oracle, and Amazon will have negative free cash flow in 2026 because of their AI investments. Meanwhile, Apple is expected to produce $143 billion in free cash flow, up from $109 billion last year, per FactSet. Its capital expenditures will likely decline in 2026.
"[Apple] has definitely been out of favor, but carries a lot less direct near-term execution risk," Klein wrote.
To be sure, Apple isn't immune from the vagaries of the AI trade. A report Wednesday from Counterpoint Research estimated that memory components in the coming iPhone 18 Max will rise by almost $300 compared to its predecessor. Apple will pass on a chunk of the costs to consumers.
While hundreds of millions of Americans own iPhones or MacBooks, it is difficult to call a $1,000 electronic a true defensive staple. (Case in point: I bought a friend's nearly-new iPhone 16 for $300 this week knowing memory-inflated iPhone 18 prices will be tough to justify.)
But Apple is one of the few high-profile tech names that isn't a primary consumer or supplier of AI compute, and that differentiation has value.
The stock likely won't keep up with its peers if, five years from now, we live in an AI utopia that makes today's capital expenditures look light. But Apple can diversify a tech portfolio for those wary of going all-in on semiconductors and cloud compute.
If Apple's share price is any indication, plenty of investors want to keep at least some money away from the AI trade.
Write to Nate Wolf at nate.wolf@barrons.com
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July 10, 2026 12:32 ET (16:32 GMT)
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