By Jacob Sonenshine

Sometimes, you're smart to zig when everybody else zags. Right now, that means not chasing the artificial-intelligence stocks that are look pricey.

The technology-heavy Nasdaq Composite is up 22% from its war-driven low in late March. It just keeps hitting record high after record high.

Behind those gains are the ever-higher profit expectations for chip makers and the builders of AI data centers, which are in high demand from Amazon.com, Microsoft, and other big AI services companies. Many software names have rebounded, too, buoyed by a market that recognizes OpenAI and Anthropic won't destroy demand for all of their products.

So, the Nasdaq is perched on an expensive valuation -- 25.5 times what analysts expected aggregate earnings for the coming 12 months. It isn't the highest price/earnings multiple ever, but it's at the higher end of its range this year.

Sure, the tech rally can go on for a bit longer, but the stocks are vulnerable to a steep drop at even a whiff of trouble. If just one big AI services company slows down its capital investment in data centers, the stocks of the companies that make the physical goods will sink.

That's why Trivariate Research's Adam Parker screened for alternatives to the stocks in his AI chip basket.

Parker hunted for stocks that have correlations of 0.2 or lower to his AI basket -- 1 is perfectly correlated -- and a gain of at least 10% in the past six months. He set his criteria to avoid companies that have struggled to produce earnings to the market's expectations.

Nine well-known stocks that surfaced: Eli Lilly, Johnson & Johnson, Pfizer, Walmart, Coca-Cola, Costco, Exxon Mobil, and Verizon Communications.

Another is Linde, which produces industrial gases. The company has a $232 billion market capitalization, the largest within this sub-business of the chemicals industry.

Other positive factors: It beat first-quarter sales and earnings estimates last week, and lifted revenue guidance. It often has pricing power with customers, and has implemented price increases this year to offset higher energy costs.

There's plenty else to like about Linde. Its contracts with customers are "take or pay" -- customers must either take all the chemicals they've agreed to buy for a number of years, or pay certain amounts, which stabilizes sales.

And the company has a diverse customer base -- from electronics to manufacturing and metals to food and healthcare. Food and healthcare are slightly less economically sensitive, and help reduce how much Linde's sales fluctuate.

Analysts expect Linde's sales to grow just over 5% annually over the coming two years to $37.7 billion. They forecast a small uptick in the operating profit margin, which amounts to an annual per-share earnings growth of 9%.

That could prove enough to lift the stock through this year -- and shares could easily outperform the market if tech takes a hit. Linde's forward P/E multiple is just over 26 times, right about in the middle of its 2026 range. If it keeps providing strong updates on its profit outlook, the stock will perform just fine.

And just fine is something that isn't so bad these days.

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.

(END) Dow Jones Newswires

May 05, 2026 13:54 ET (17:54 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.