Rohan Reddy, director of research at Global X ETFs, spoke with Quartz for the latest installment of our “Smart Investing” video series.

Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.

ANDY MILLS (AM): Equities have been having a party for months, maybe they’re losing a little bit of steam right now. There are a lot of factors making that happen. The wars, inflation, housing costs. Where should investors turn to put their money right now?

ROHAN REDDY (RR): The flight to quality has been one that we’ve been talking to a lot of our clients about. And even retail investors have been piling into a lot of these areas. The definition of flight to quality has changed a lot. Usually in the past it’s been different sectors, but these days we kind of like mega cap stocks a lot, especially in the tech sector because of their Fortress-like balance sheets. And also the fact they have a lot more levers to pull just because their earnings, for example, are expected to grow in the tech sector 25% this year. So we think it’s gonna be a real driver of stocks. The cyclicals are a little bit more of a challenging area at the moment. I think as long as the Fed is able to navigate a soft landing, it’ll make cyclical stocks a lot better. But those that are interest rate sensitive, those that are more prone to consumer downturns are the ones that we are staying away from at the moment.

AM: So you think that there’s more room to run in mega-cap tech, even as the AI boom reaches its next phase?

RR: Yes, because valuations have not been as big of a problem as investors have anticipated, because a lot of them, for example, with the earnings growth, have been growing into those valuations quite a bit. So AI has been the talk of the market for most of this year. But we do think that a lot of companies, for example, that really haven’t delved as much into it. Apple is a pretty good example. If they start to integrate that a little bit more into their business, maybe it can add that next layer of growth.

Read more: Nvidia is an AI superpower. It started at a Denny’s

AM: Gotcha. Yeah. Apple kind of surprised everybody recently with their earnings. Are there any other stocks you’re looking at in the tech sector that people should buy?

RR: We still like Nvidia a lot just because of what we’re seeing with AI. Their customer base is really strong right now just because they have a unique moat. And so we envision that because of data center growth and just a lot of applications with AI that their chips are gonna be in high demand. So even though it’s an easy answer at the moment, it’s one that we still like a lot.

AM: So what are you staying away from?

RR: I would say the areas that are a little tougher right now are those that are very reliant on the consumer at the moment. And we’ve kind of seen it with companies like Starbucks and McDonald’s, for example, where obviously different parts of the consumer chain where one is a little bit more in the higher end consumer one’s maybe a little bit more in a different part of the consumer base, but there is a lot of data showing right now that the consumer is a little bit stretched at the moment. And so as disposable income starts to dry up, and we saw, for example, news that pandemic savings have been wound down almost entirely. It’s gonna add a lot more challenges to how these companies can grow revenues, especially in light of high inflation.

AM: Yeah. So Starbucks, McDonald’s, they both reported earnings recently. Howard Schultz said, just lower the price of your coffee. Do you agree with that?

RR: Well, it’s a lot tougher than that might seem just because of labor. The labor market is really tight right now. And also just materials and input costs are very high too. So it’s ultimately a question of top line versus bottom line numbers. I think it’s possible that they could do something like that, but it also would be unlikely from what we’ve seen from a lot of companies where they’re willing to go ahead with higher costs and bear some of the short term burdens, just because to get back to that point ultimately is another challenging path of higher costs.

AM: Thank you for coming today, Rohan.