The S&P 500 has bounced back and seems as strong as ever, despite last week’s weak results from Meta (NASDAQ: META). The Facebook owner’s shares collapsed 11.3% after its third-quarter results revealed a large tax charge and excessive R&D costs.
Due to its significant size, the ripple affects sent shockwaves through the entire index.
Yet despite the initial negative reaction, several brokers raised their ratings for Meta. With the stock down 20% in the past three months, it’s possible they see a value opportunity.
But new and unrelated developments this week add to the US market’s already-uncertain outlook. As such, I’m growing increasingly wary of the S&P 500 and opting for something else entirely.
An AI spending spree
Even though Meta’s revenue rose 26% in Q3, a 32% increase in costs hurt the company’s bottom line. Those costs largely came from an eye-watering $30bn invested in artificial intelligence (AI).
Sure, it’s hard to deny AI’s place in the future. But it’s a highly saturated and competitive industry — and Meta doesn’t appear to be at the forefront. However, that may change soon.
According to CEO Mark Zuckerberg, the company’s spent billions on AI datacentres planned to go live next year. One site is reportedly the size of Manhattan – but whether any of it eventually proves profitable remains to be seen.
Adding to the S&P 500’s woes, Softbank just sold its stake in Nvidia, sending semiconductor stocks spiralling. And following an SEC investigation into data-collection practices, AppLovin stock tumbled 8.7%.
A safer option?
Rather than take a risk with the shaky S&P 500, I’m looking for a safer haven closer to home. And what could be safer than the company that keeps the lights on: National Grid (LSE: NG).
As the UK’s core electricity and gas network operator, the business is rooted in essential infrastructure rather than high growth — which often brings lower risk.
Not only does it benefit from predictable, regulated earnings, but it has an excellent dividend track record. Sure, the 4.5% yield may not turn heads, but when it comes to reliability, it’s a top pick, in my book.
Of course, some of these factors also add risk. It’s at the whim of regulatory changes or political intervention, either of which could limit earnings or raise costs. Recent government-mandated infrastructure upgrades are an example of an unavoidable cost that forced a minor dividend cut.
Still, it would be hard to find a more defensive company on the FTSE 100. That’s why I think it’s a safer bet than speculative AI stocks right now. As such, I plan to keep rebalancing into the shares until the global economic landscape looks more stable.
Final thoughts
AI’s undoubtedly the big tech story of 2025, and that looks likely to continue into 2026. Among the big tech names vying for a piece of the pie, some will win — but many will fail.
While I’ll always retain some exposure to the S&P 500, the current wave of overvalued companies has me concerned. Until I see some rationality return to the market, I’m erring on the side of caution and opting for defensive stocks like National Grid.
And it’s not the only one — the FTSE 100 hosts several similarly ‘safer’ stocks for risk-averse investors to consider.
