After significant gains, the AI-driven tech sector is on track for a third consecutive year of over 20% growth. However, December's divergent performance among tech stocks suggests narrowing leadership and resurgent volatility—particularly in overvalued names—prompting investors to reconsider defensive positioning.
Against this backdrop, traditional defensive sectors like blue-chip pharmaceuticals, regulated utilities, and consumer staples remain relevant. Quantitative strategist Steven Cress screened for high-quality defensive stocks combining durable cash flows, essential services, and growth metrics, while factoring in valuation, profitability, momentum, and analyst revisions. Here are four standout picks poised to balance tech exposure in 2026:
1. **Brookfield Infrastructure (BIP.US) – Utilities** Owning global infrastructure assets (utilities, energy midstream, real estate, data centers), BIP generates predictable cash flows via inflation-linked contracts. Its 5.08% dividend yield and 9% YoY FFO growth in Q3 underscore resilience. Targeting 5–9% annual dividend hikes, BIP also benefits from expanding data infrastructure investments.
2. **Iberdrola (IBDRY.US) – Utilities** This global electricity leader operates regulated grids and renewable assets across Europe and the Americas. With a 3.40% dividend yield, 16.6% net income growth, and sector-leading cash flows ($15B YTD), Iberdrola offers stability and international diversification.
3. **Vertex Pharmaceuticals (VRTX.US) – Healthcare** Known for cystic fibrosis therapies, Vertex boasts non-cyclical demand and pricing power. Its PEG of 0.16 and 12% EBITDA growth (45% above peers) reflect undervalued growth. Pipeline expansion into kidney diseases enhances long-term defensiveness.
4. **Incyte (INCY.US) – Healthcare** Focused on oncology/inflammation, Incyte’s profitable Jakafi franchise supports a 0.07 PEG and 39% EBITDA growth (4x sector median). Recent EU approval for its lymphoma therapy adds growth optionality at a modest 14.2x P/E.
**Conclusion** As tech leadership wanes, these defensive stocks—anchored by utilities (BIP, Iberdrola) and fortified by healthcare innovators (Vertex, Incyte)—offer capital preservation with selective growth potential for 2026.