Unilever Shares Look Defensive as AI Crash Fears Mount

With Unilever shares attracting renewed interest from investors rotating out of high-growth technology names, the consumer goods giant (LSE: ULVR) is worth examining closely, particularly if the technology sector’s wobble deepens into something more serious.

How Much of an AI Correction Has Already Happened?

The question of whether a full AI-driven market crash is underway does not yet have a clean answer. A stock market crash is conventionally defined as a fall of 20% or more. The S&P 500 has been trading near all-time highs, and most of the heavily AI-weighted ‘Magnificent 7’ are down 10% or less from their peaks. That is not crash territory.

Pockets of the AI supply chain tell a different story. Micron and Sandisk have each shed more than 30% in recent months. Whether those moves represent isolated volatility or an early signal is the question investors are sitting with. A study cited by market participants suggesting that fewer than 5% of AI initiatives have turned profitable adds weight to the more cautious interpretation.

The FTSE 100 approaching the 11,000 mark for the first time is consistent with a rotation into defensive names. Indices weighted toward mining, oil, and consumer staples tend to attract flows when technology sentiment sours. That is the context in which Unilever has been moving.

Why Unilever Shares Hold Up When AI Stocks Don’t

Unilever’s latest results, covering the first half of 2026, give the defensive thesis some numerical grounding. Unilever’s H1 2026 results showed underlying sales growth of 4.8%, with underlying volume growth of 4.2%, turnover of €25.6 billion, and an underlying operating margin of 20.3%. Underlying earnings per share rose 2.4% to €1.61, and free cash flow came in at €1.5 billion, up €0.5 billion on the prior period. The company also upgraded its full-year 2026 outlook. Power Brands, which now represent 78% of turnover, grew underlying sales by 6.0% in the half, with 5.4% of that coming from volume rather than price.

The earnings cadence here matters. Full-year 2024 underlying EPS grew 14.7% to €2.98, which the Unilever PLC annual report filed with the SEC described as the first substantial increase since 2019. Total shareholder returns in 2024 came to €5.8 billion across dividends and buybacks. The direction of travel has been consistent across several reporting periods now, which separates this run from the noise that surrounded the company in the years immediately following the pandemic.

The balance sheet has also improved. Unilever’s 2025 annual report puts closing net debt at €23.1 billion as of the H1 2025 period, down from €24.5 billion at 31 December 2024, with a net debt to underlying EBITDA ratio of 2.0x. A portion of that reduction was driven by a €2.7 billion payment from the ice cream business ahead of its demerger, but the free cash flow contribution was genuine.

Capital returns have continued. The share buyback programme announced on 12 February 2026, worth up to €1.5 billion, commenced on 30 April 2026 and was completed on 5 June 2026, with 30,703,780 ordinary shares repurchased at an aggregate market value of €1,499,999,891. Unilever has guided for a total of €6 billion of buybacks between 2026 and 2029, supported partly by cash proceeds from the separation of its foods division.

That foods separation is itself a forward variable. The combination of Unilever Foods with McCormick is progressing toward completion by mid-2027 at the latest, subject to McCormick shareholder approval and regulatory clearance. The combined entity will carry a secondary listing on the London Stock Exchange, with McCormick retaining its primary listing on the New York Stock Exchange. How the portfolio looks post-transaction will matter for anyone assessing the stock over a multi-year horizon.

One caveat the original AI bubble framing tends to obscure: Unilever is not entirely insulated from a broad economic slowdown. If AI-driven capital expenditure contracts sharply enough to drag employment and consumption, staples companies feel it too, just with a lag and at lower amplitude.

The next test is the full-year 2026 result and whether the upgraded outlook is delivered. If Power Brand volume growth holds above 4% and the margin trajectory remains intact past 20%, the defensive thesis stays in place. A disappointment on either front would reopen the valuation question quickly.