XLC: Combining AI Growth & Telecom Defense

Of all the equity sectors to gain focused exposure to, why should advisors and investors consider choosing communication services? Key Takeaways: The communication services sector may be getting overlooked by some investors, given its unique opportunity set. Communication services funds can help provide lower-cost access to key AI players, while barbelling tech growth alongside defensive telecom stocks. State Street offers low-cost access to the sector through the State Street Communication Services Select Sector SPDR ETF (XLC) . Frequently, regular investors will ask themselves this question, and choose to allocate to something like the tech sector instead. While the tech sector itself surely presents a compelling opportunity set, overlooking the communication services sector could cause folks to miss out on compelling growth opportunities. Working in favor of the communication services sector is a number of beneficial factors. To start, the sector contains names well-positioned to benefit from the AI buildout, such as Meta and Alphabet. Communication services companies are also offering a strong opportunity set. Furthermore, this AI-focused opportunity set often trades at a discount compared to pure tech ETFs. Advisors and investors can use communication services funds to ride momentum through tech and AI without paying as much of a price premium as one traditionally faces from pure-play tech exposure. Tech Momentum Paired With Traditional Defense in XLC Interestingly enough, gaining focused exposure to the communication services sector can help create a barbell portfolio. This is because the sector itself contains both mega-cap tech names like Meta and Alphabet, while also featuring telecommunications giants such as Verizon, Comcast, and T-Mobile. Here’s where the barbell portfolio comes into play: telecommunications stocks are traditionally seen as defensive plays, due to how smartphones, cable, and internet services are largely seen as vital expenditures these days. As such, communication services exposure allows folks to tap into meteoric mega-cap tech growth with the added downside protection of telecommunications. For those who find the communication services sector increasingly appealing, the State Street Communication Services Select Sector SPDR ETF (XLC) could help out. The fund’s approach centers around gaining exposure to communication services companies inside the S&P 500. Of course, this includes Meta, Alphabet, T-Mobile, Verizon, and much more. This strategy allows advisors and investors to tilt into the communication services sector and access the benefits within. For those seeking lower-cost access to AI momentum, barbelled tech growth, and the defensive advantages of telecommunications, the fund may warrant a closer look.