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How Big Tech Became the New Defensive Stock Play

Amazon shares were up 10.1% this past week.

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Crises make strange bedfellows. Just look at the new class of defensive stocks: utilities, consumer staples, healthcare—and Big Tech.

Over the past week, the
Technology Select Sector SPDR
exchange-traded fund (ticker: XLK) was the market’s best performer, rising 6.3%, followed by a 6.1% gain for the
Communication Services Select Sector SPDR
ETF (XLC). The defensive
Utilities Select Sector SPDR
ETF (XLU) climbed 4.1%, followed by the
Consumer Discretionary Select Sector SPDR
ETF’s (XLY) 3.6% gain.

In reality, though, technology did the heavy lifting. Given sector divisions, XLC includes Big Tech names like Google parent
(GOOGL) and Facebook parent
Meta Platforms
(META), which gained 12.8% and 10% this past week, respectively, while XLY is home to
(AMZN), up 10.1% for the week, and
(TSLA), which rose 7.5%.

That makes three of the four best-performing sectors this week tech-centric, even as big market swings fueled by banking worries sent investors for cover in relative safe havens. Aside from utilities’ rise, the
Health Care Select Sector SPDR
ETF (XLV) climbed 1.7% and the
Consumer Staples Select Sector SPDR
ETF (XLP) added 1.5%, making them the fifth- and sixth-best performers. Likewise, gold prices jumped just under 6%, notching their biggest one-week percentage gain in nearly three years, and silver was similarly strong.

That’s a marked change from what investors have come to expect: In 2022, as in many other bear markets, riskier growth-oriented sectors like tech got hammered as investors clamored for workaday Steady Eddie performers.

Yet it also makes sense considering that unlike start-ups, Big Tech players like
(AAPL), Alphabet, and
(MSFT) are sitting on huge cash hoards that make them much less exposed to what might be a balance-sheet downturn. The former two also pay a small dividend—once anathema to tech, but part of the appeal of defensive plays like utilities and staples.

In addition, their bread-and-butter businesses don’t seem to be under threat by banking woes. On Friday, KeyBanc Capital Markets’ analyst John Vinh noted that sales of iPhones and Apple hardware in February “were moderately better than normal seasonality reflecting resilient demand and improving supply.”

Likewise, Morningstar analyst Ali Mogharabi wrote earlier this week that the turmoil should not result in “any material impact on online media or advertising firms under our coverage and we are not adjusting our fair value estimates on these stocks.”

He notes that a hit to Google’s cloud storage revenue would likely be less than 10% and have minimal impact on the company’s overall profitability, given what would likely be a resumption of venture-capital funding for start-ups next year.

At the same time, this dynamic—which has provided such a lift for Big Tech—is also distinctly positive for consumer staples, a rare occurrence.

While staples are benefiting from the typical flight to safety, they also get a lift from the fact while they don’t have relationships with troubled institutions like Silicon Valley Bank, as some of their disrupter rivals did.

“[A] fair number of industry start-ups did have exposure to SVB and, in addition to the related short-term disruption, likely tighter subsequent lending standards and a stronger emphasis on free cash/profitability can be expected to further limit the ease with which small companies gain financing and enter the industry,” wrote Mizuho Securities analyst John Baumgartner.

If nothing else, the past few years have taught investors to expect the unexpected. Right now, at least, both iPhones and ice cream are providing shelter from the storm.

Write to Teresa Rivas at


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