By Jacob Sonenshine

Those looking to buy stocks right now should look for the ones that aren't correlated to the artificial intelligence trade.

The major indexes began Tuesday in the red, with the Nasdaq Composite down more than 1%, continuing a drop that began last week. The culprit has been signs that the trade war between the U.S. and China has entered a new phase: Beijing is tightening restrictions on exports of rare-earth metals, while President Donald Trump has threatened additional 100% tariffs on China.

That is putting pressure on most stocks, but the greatest pain was in AI names, including software providers, chip makers, and other hardware and manufacturing companies that build products for data centers. They have the most to lose, because if tariffs cause inflation and eventually reduce broader demand in the economy, investment in data centers could slow down, hurting their sales and earnings. Those stocks have also risen the most this year, so any reversal of their growth stories is bound to dent their prices.

A screen from Adam Parker, founder of Trivariate Research, could help investors weather any coming storm. He looked for stocks that both have a correlation of 0.2 or lower to his AI basket of stocks in the past six months and are up at least 10% in that time. The idea was to find names that can not only avoid losses in the broader market, but that have recently shown fundamental strength, meaning they could keep rising.

Barron's added another layer of protection for investors by searching the list for stocks that aren't in economically sensitive sectors. The defense contractors Northrop Grumman and Lockheed Martin; the drug distributors Cencora and McKesson; and Welltower, a real estate investment trust that invests in healthcare projects, made the cut. The defense contractors were down only a few tenths of a percent Tuesday morning, while the others were in the green just after the open of trading.

Another name on the shortlist is the tobacco company Altria, which was up almost 1% Tuesday morning and has risen 14% over the past six months.

The best news of all is that isn't expensive yet. The stock trades at nine times the consensus forecast for earnings per share for the coming 12 months, less than half of the S&P 500's 22 times. Philip Morris, Altria' main rival, trades for just over 14 times.

Altria's valuation has room to rise as the market becomes more comfortable with its potential for long-term growth.

Sales growth this year is expected to land in the low single-digit percentages, bringing revenue to $20.2 billion, according to FactSet, as the legacy cigarette business declines. But newer, smokeless products, which still represent a small portion of the business, are growing.

If the company can continue to take some market share with the new products, which it has recently done, sales and profits can grow sustainably. The stock would have plenty more room to rise.

AI isn't the only place to make money.

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

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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October 14, 2025 12:47 ET (16:47 GMT)

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