Too Exposed to U.S. Tech? Here’s the TSX Stock I’d Add Today

Royal Bank of Canada (TSX:RY) and the big banks could be great bets to diversify a tech-heavy portfolio this March.

Key Points
  • If U.S. mega-cap tech volatility is pushing past your risk tolerance, diversify into TSX names instead of doubling down and panicking on a deeper drawdown.
  • Royal Bank (TSX:RY) offers a large-cap alternative with tailwinds from healthier net interest margins and capital-markets activity, trading around 15.4x trailing P/E with a ~2.93% yield after a ~5% pullback.

Plenty of Canadian investors have looked to U.S. markets for tech-sector exposure, and for good reason: tech accounts for only a very small slice of the TSX Index. And while one could overweigh the limited selection of tech names on this side of the border, I’d argue that shutting out the U.S. market is doing your portfolio (Tax-Free Savings Account, Registered Retirement Savings Plan, or anything else) a huge disservice, especially if you’re a young, growth-minded investor who prioritizes capital appreciation above all else (including passive income and low beta).

Nothing against the TSX tech stocks, though, as they’re pretty solid firms. That said, given the rise of artificial intelligence (AI), agents (think OpenClaw and similar products), large language models (LLMs), and all the sort, I’d argue that it only makes sense to go for those mega-cap tech titans in the U.S. market.

There really is nothing similar on this side of the border. And since size could be a profound benefit amid the AI data centre buildout, I’d argue that prioritizing U.S. tech stocks, even over domestic equities, could make a lot of sense, especially in the earlier innings of a boom or upswing in tech.

Of course, we’re around three years into this tech-led bull market. And though we’re not even one quarter into 2026, the tech trade is starting to look quite sluggish, especially as the Magnificent Seven correct.

chatting concept

Source: Getty Images

The tech trade is running out of gas. Time to diversify in TSX stocks?

Whether the Magnificent Seven are still magnificent is up for debate. Either way, many are turning against tech, and if you’re not ready for a painful hit or a bear market plunge in the mega-cap tech titans in the U.S., maybe it’s time to diversify into Canadian stocks, which have had the upper hand for just over a year now.

Of course, chasing performance is never a good idea. But, at the end of the day, if you’re not happy with your sector allocation or you found out that you’re not quite properly diversified the hard way (let’s say your portfolio is down more than 5% on the year), it’s far better to correct your mistake than than to double down on the dip if your stomach can’t handle the volatility.

While I’m a fan of the U.S. tech titans, even on the latest dip, I think it can be a bad idea to overextend your risk tolerance if you cannot handle it. Indeed, if you’ll wind up selling after a 30% drop or even a 50% one, perhaps diversifying into the non-tech or anti-tech plays could be the move as the AI trade takes a vicious turn and we find out whether or not the whole thing is actually in a bubble or not.

Royal Bank of Canada: The ultimate buy as tech fades?

So, if you’re too heavy on American tech stocks, perhaps rotating into a Canadian bank, like Royal Bank of Canada (TSX: RY), could be the move. The Canadian banks are feeling the full force of tailwinds, and as net interest margins (NIMs) get healthier while capital markets activity stays elevated, my guess is that Canada’s top bank, Royal, is poised for even more wins in the years ahead.

The stock slipped over 5% from its peak, which, I think, could provide an opportunity for investors seeking value and strength beyond the tech scene. With a 2.93% dividend yield and a modest 15.4 times trailing price-to-earnings multiple, I’d have a closer look at the $315 billion Canadian titan, as the dividend hikes keep on coming while Canada’s biggest bank looks to continue leading the way.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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