Investors are fleeing high-volatility growth stocks, including heavily indebted AI infrastructure hosts such as CoreWeave and IREN, in favor of perceived defensive sectors, including utilities and consumer staples. Utilities, however, have become exposed to the electricity demand generated by the data center buildout, potentially limiting their defensive characteristics. The XLP fund, led by Walmart, Costco, Procter & Gamble and Kimberly-Clark, offers a more defensive alternative through stable revenue, a lower beta and an annualized dividend yield of approximately 2.6%. The article proposes a bullish call diagonal spread on XLP, buying a January 2027 $85 call and selling a November $92 call, to capture a structural rotation into defensive stocks through early 2027.
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