Investors who feel overallocated to artificial intelligence-focused equities may find diversification within the S&P 500 itself, according to research from Evercore ISI. The firm identified a group of stocks that tend to move opposite the broad index - so-called negative beta names - and suggested they could help preserve equity upside while reducing exposure to concentrated AI risk.
Evercore analyst Julian Emanuel argued that the market currently shows unusually high single-stock volatility alongside low implied correlations between individual issues. In his view, a growing number of stocks now trade inversely with the S&P 500, creating fresh options for investors seeking downside mitigation without abandoning long equity positions.
The note explains why traditional hedges have become less reliable. Evercore highlighted three specific dynamics: emerging markets have become more technology-heavy than the S&P 500, inflation has altered the historical relationship between stocks and bonds, and gold has recently failed to protect against geopolitical risk-off moves. Those shifts, the firm said, have eroded the effectiveness of conventional diversification tools.
At the same time, Evercore flagged the degree of concentration inside the index. Index investing has increasingly overlapped with AI bets, the firm noted, as the top ten S&P 500 constituents now represent roughly 40% of the index's weight and account for most of the recent upward revisions to earnings per share. That concentration, Evercore suggested, increases the appeal of finding offsetting exposures within the same equity universe.
The firm maintained its year-end S&P 500 target of 7,750 and reiterated a bull case of 9,000, scenarios Evercore said would be driven by gains in information technology, communication services and consumer discretionary sectors - areas it describes as AI-heavy.
For investors already fully engaged in the AI trade, Evercore recommended a targeted alternative: negative beta stocks that are also receiving upward earnings revisions. The firm presented this approach as "an attractive strategy to retain long exposure to equity upside and navigate near-term volatility from new Warsh Fed," enabling investors to stay positioned for market gains while reducing sensitivity to index-driven swings.
Evercore highlighted four Overweight-rated negative beta names by name: Coca-Cola, Costco, T-Mobile and Mondelez International. These companies were presented as candidates that combine inverse index tendencies with favorable earnings momentum, according to the firm's research.
For portfolio managers and individual investors confronting heavy AI concentration within large-cap indexes, Evercore's recommendation offers a framework to rebalance risk while maintaining equity participation. The firm’s view underscores the changing landscape for hedging and the potential role of select, negatively correlated stocks inside the S&P 500.