A possible decline in the earnings lift from artificial intelligence investment has brought defensive stocks into focus at Goldman Sachs, whose screen includes Tyson Foods and CVS Health.
Tyson led the screen on free cash flow yield measured over the previous four quarters, at 11%. CVS registered 9% on the same measure. The two companies bring consumer staples and health care into a comparison aimed at investors weighing weaker growth.
The share-price figures accompanying the screen show different paths for the two stocks. Tyson had fallen nearly 17% over six months. CVS had gained 15% for the year, despite a 15% decline over the preceding three months. Their dividend yields in that snapshot were 3.72% and 2.88%, respectively.
Goldman estimates that spending on AI accounts for roughly half of S&P 500 earnings growth. The bank expects that contribution to diminish as the pace of spending growth slows. It has also identified higher financing costs as a concern for AI infrastructure investment.
Over two weeks, Goldman’s Cyclicals vs. Defensives pair lost 6%. The bank reported that move alongside its discussion of growth risks, without establishing that financing costs caused the decline.
The defensive screen addresses a weaker-growth possibility rather than replacing Goldman's central outlook. Goldman expects household spending in 2027 to benefit from lower interest rates and energy prices. It also sees a possible opportunity for consumer-facing stocks that have trailed the broader market to narrow that gap.
Separately, Goldman hedge fund clients reduced their technology exposure during the five trading sessions ended Oct. 15, Bloomberg News reported. Technology still represented 23.5% of net allocations in Goldman's global prime brokerage book after the reduction, a reading at the 90th percentile of the previous five years.
