The momentum trade was punished in July. The Nasdaq slumped more than 3% for the month, while the PHLX Semiconductor Index cratered nearly 20%. The market’s mood has shifted abruptly: chips and artificial intelligence plays look tired, and stability is becoming the new appeal. Investors are rotating away from names saddled with massive AI capital-expenditure overhangs and into companies that offer dependable dividends, healthy revenue streams, and abundant free cash flow. That rotation is being called the “pay me now” trade, and eight value-leaning exchange-traded funds are moving into the spotlight.
At the top of the list is the iShares Core Dividend ETF. The fund has climbed 23% this year and holds a cross-sector mix of high-yielding names such as Accenture, HP, ExxonMobil, JPMorgan Chase, and Johnson & Johnson. It yields about 2.7%. Even with the 10-year Treasury yield hovering near 4.74% and long-term rates still grinding higher, dividend payers are expected to remain in demand.
Healthcare is drawing interest for its steady income stream. The iShares U.S. Healthcare Providers ETF counts UnitedHealth, CVS Health, Elevance Health, and Humana among its large insurer holdings. The SPDR S&P Pharmaceuticals ETF, meanwhile, spans industry giants Merck and Bristol Myers Squibb alongside smaller drugmakers and biotechs such as Crinetics Pharmaceuticals.
For those worried about the AI spending spree at hyperscalers such as Meta and Alphabet, smaller companies that may benefit indirectly from artificial intelligence are worth a look. The Pacer U.S. Small Cap Cash Cows ETF holds Instacart and Bath & Body Works, while the Invesco S&P SmallCap 600 Revenue ETF features positions in MaxLinear and Liquidia.
As large-cap momentum cools, dependable blue chips are drawing attention. The VictoryShares Free Cash Flow ETF includes Expedia, Devon Energy, Newmont, and Merck among its top 10 holdings. The iShares Edge MSCI USA Value Factor ETF, for its part, is heavily weighted in Cisco Systems, General Motors, and Verizon — stocks that could benefit from steady economic growth.
The outlook for Big Tech remains favorable overall, but lofty expectations need time to reset, especially in the semiconductor space. Correlations within the technology sector are expected to weaken, creating winners and losers. In that environment, ETFs may not be the best way to play tech; stock selection matters more.
One tech subsector still stands out: cybersecurity. The Global X Cybersecurity ETF counts Fortinesemit — which just reported strong earnings this week — among its top holdings, with Okta and Palo Alto Networks also carrying significant weight. Such funds are not cheap. The ETF trades at roughly 31 times this year’s earnings estimates, but that is a steep discount to its five-year average price-to-earnings ratio of 45. As valuations across the broader software sector pull back, that discount is helping this cybersecurity fund, alongside the more value-oriented names, quietly take the lead as the new momentum trade.
