Dividend-paying companies are rapidly closing the earnings growth gap with technology stocks and contributing more earnings momentum to the S&P 500. After a significant increase over the past year on this key earnings metric, the trend suggests that dividend stocks may present an even stronger case to investors seeking income and safety in a volatile market.

The earnings momentum broadening out beyond the tech sector comes at a time when investors are seeking ways to limit risk amid the second military conflict in the Middle East in under a year and a shock to the oil markets that is unprecedented.

In Q1 2025, the S&P 500 Dividend Aristocrats Index posted earnings growth of negative 5.5%. By Q4 of last year, that earnings growth rate had rebounded to positive 9%. At the same time, the Nasdaq 100 Index saw earnings growth decline from over 35% in Q2 2025 to under 15% in Q4.

Simeon Hyman, global investment strategist at ProShares, said during this week’s CNBC’s “ETF Edge” podcast that the rotation that began away from the Mag 7 tech stocks well before the war merits a deeper look from investors at a time of market uncertainty.

“We think one of best ways to take advantage of it is through quality stocks, companies growing their dividends for 25 consecutive years at minimum and that have been out of favor,” he said.

While the reversal began before the outbreak of war, Hyman said high quality, lower volatility stocks may be “kind of good to have during a conflict.”

“It’s not only the price [of the stocks] turning around but the fundamentals turning around,” he said. “Go back four quarters and all the earnings growth was coming from the tech sector and Nasdaq 100. Those dividends growers year-over-year, earnings were shrinking a little bit. But now the gap has closed and may shortly go the other way. We’re almost now to parity,” he said, referring to Bloomberg data cited by ProShares in a recent blog post on the topic.

ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is one of the many exchange-traded funds that offers exposure to large-cap U.S. stocks that pay healthy dividends. Its top three holdings are Chevron, Exxon Mobil and Target.

ETF experts agree that the outlook for dividend stocks has improved across the market.

“Growth characteristics of companies in the financial sector, the health care sector, the industrial sector … those are where you often find dividend growth. They continue to experience more and more growth,” Todd Rosenbluth, head of research at VettaFi, told CNBC.

A long history of dividend increases reflects consistent cash flow and disciplined management, however, it has not traditionally matched the rapid profit expansion seen in the technology sector. But strong operating performance and improving margins have helped boost profits for many dividend-payers from other sectors. And as earning rise, these companies continue to increase dividends while strengthening their balance sheets. At the same time, expectations for technology stocks remain extremely high after several years of strong gains, and as tech firms are spending huge sums on AI buildouts which is stressing their balance sheets and cash flow. Dividend-paying companies outside of tech often trade at more moderate valuations, and as their earnings growth improves, investors may increasingly view them as offering both stability and expansion.

Of course, if the U.S.-Iran war — and factors such as oil prices persistently above $100 and a Strait of Hormuz closure that is prolonged — pushes up prices across a supply-depleted economy and sends the global economy into a recession, there is no sure thing for stock investors. Dividend stocks and the ProShares NOBL ETF have been caught up in the recent stock market negative sentiment, down 5% in the past month but still up close to 8% over the past year.

Hyman said in his view this is “certainly not a time to capitulate, but maybe a time to tweak around the edges,” and focus more on quality stories. “We love our dividend growers,” he said.

He noted that after the two prior Gulf wars which were prolonged conflicts, stocks were higher in the six to 12-month periods after initial pullbacks, and up by as much as 25-30%. “The history is pretty darn clear … markets do rebound,” he said.

The history is also clear, Hyman said, on dividend stock outperformance having “some durability to it.” And right now, these stocks are pulling even more weight in the market. “In addition to the durable outperformance opportunity from the dividend growers, the other thing that is very important is that it has kept overall S&P 500 fundamentals stable” Hyman said. “They are now filling the gap,” he said, as mega cap tech earnings growth slides, “and that suggests a little bit of a soft landing,” he added.

Disclaimer

Nvidia CEO Jensen Huang unloaded roughly $36.4 million worth of stock in the leading artificial intelligence chipmaker, according to a U.S. Securities and Exchange Commission filing.

The sale, which totals 225,000 shares, comes as part of Huang’s previously adopted plan in March to unload up to six million shares of Nvidia through the end of the year. He sold his first batch of stock from the agreement in June, equaling about $15 million.

Last year, the tech executive sold about $700 million worth of shares as part of a prearranged plan. Nvidia stock climbed about 1% Friday.

Huang’s net worth has skyrocketed as investors bet on Nvidia’s AI dominance and graphics processing units powering large language models.

The 62-year-old’s wealth has grown by more than a quarter, or about $29 billion, since the start of 2025 alone, based on Bloomberg’s Billionaires Index. His net worth last stood at $143 billion in the index, putting him neck-and-neck with Berkshire Hathaway‘s Warren Buffett at $144 billion.

Shortly after the market opened Friday, Fortune‘s analysis of net worth had Huang ahead of Buffett, with the Nvidia CEO at $143.7 billion and the Oracle of Omaha at $142.1 billion.

The company has also achieved its own notable milestones this year, as it prospers off the AI boom.

On Wednesday, the Santa Clara, California-based chipmaker became the first company to top a $4 trillion market capitalization, surpassing both Microsoft and Apple. The chipmaker closed above that milestone Thursday as CNBC reported that the technology titan met with President Donald Trump.

Huang still holds more than 858 million shares of Nvidia, both directly and indirectly, in different partnerships and trusts.

Brooke Seawell, venture partner at New Enterprise Associates, sold about $24 million worth of Nvidia shares, according to an SEC filing. Seawell has been on the company’s board since 1997, according to the company.

The West shouldn’t assume that China is lagging behind the U.S. and Europe on tech developments, Microsoft’s president and vice-chairman warned.

U.S-China tensions in the past few years have centered on the battle between the two nations for tech supremacy, culminating in a slew of export controls on critical technologies. Late last year, China’s Huawei surprised the market with the release of a smartphone whose reviews indicated downloads speeds associated with 5G, sparking speculation of an apparent chip breakthrough that defied U.S. tech sanctions.

Speaking at the Web Summit tech conference in Lisbon, Portugal, on Tuesday, Microsoft’s Brad Smith told CNBC that “in many ways,” China is close to or is even catching up on technology.

“I think one of the dangers, frankly, is that people who don’t go to China too often assume that they’re behind,” he told CNBC’s Karen Tso. “But when you go there, you’re impressed by how much they’re doing.”

He predicted that Chinese and American companies will be competing on technology into the distant future and urged U.S. and European companies to collaborate to grow economies and bring new advancements like artificial intelligence to the rest of the world.

Microsoft has operated in China since 1992, according to the company’s web page, including through its largest research and development center outside the U.S. Microsoft CEO Satya Nadella said last year that the firm wasn’t focused on China as a domestic market, but that it provides services to Chinese companies and has a more visible presence locally than do many other U.S. tech giants.

Asked about whether trade and tech transfers — or the movement of data, designs or innovations — with China will get more challenging as Washington transitions between the administrations of U.S. incumbent leader Joe Biden and President-elect Donald Trump, Smith it was too early to know.

“The truth is, as an American technology company, we can do business in China only when we are offering a service that the Chinese government wants to have there, and the U.S. government wants us to bring there,” he said, adding, “And in some cases they look at, say, a data center to support a Mercedes or a Siemens or a Starbucks or a General Motors — there seems to be a level of comfort. In consumer services, not really.”

He predicted that we’ll live in a world where some technology will move to China, and it won’t be the tech firms that decide.

—CNBC’s Jordan Novet contributed to this article.