Key Takeaways:
A new investment strategy called HALO is rewarding investors who are betting on physical assets over software in the age of artificial intelligence.
A new investment theme dubbed “HALO” is gaining traction on Wall Street, fueling outperformance in heavy-asset sectors like utilities and mining. The strategy, short for Heavy Assets, Low Obsolescence, bets that physical infrastructure is more resilient to AI disruption than asset-light tech companies, driving gains of more than 70 percent in some stocks.
"AI can replace a programmer, an analyst, or even an entire software suite, but it can't replace a refinery, a power grid, or a copper mine," said Josh Brown, CEO of Ritholtz Wealth Management, who coined the term.
The logic has played out in 2026, with the utilities, mining, and energy sectors of the MSCI World index all outperforming the broader market. At an individual stock level, Korean engineering firm Doosan Group has seen its shares surge over 70 percent in US dollar terms this year. In contrast, shares in software-as-a-service (SaaS) companies and property platform Rightmove have slumped, with the latter falling 25 percent late last year.
The trend reflects a potential long-term shift from growth-focused tech to value-oriented industrials, forcing investors to re-evaluate which companies hold a true "moat" in an economy increasingly shaped by AI and geopolitical tensions over strategic resources.
According to Goldman Sachs strategist Guillaume Jaisson, the quantitative criteria for a HALO company include a high ratio of fixed assets to total assets and significant capital expenditure relative to sales. Chip manufacturer TSMC, for example, has averaged $32 billion in annual capex since 2020.
This rotation into physical assets has been so pronounced that a 35 percent P/E valuation discount that European HALO stocks held over their asset-light peers a year ago has now almost completely vanished. While Jaisson believes earnings growth will now become the primary driver for these stocks, others are more cautious.
"I don’t think it’s an investable theme with an attractive risk-reward at this point," said Patrick Kaser of Brandywine Global, suggesting the easiest gains may have already been made.
The HALO theme is underpinned by a deeper narrative about global shifts. Julien Albertini, a fund manager at First Eagle Global Value Fund, argues that the end of "Pax Americana" is forcing nations to prioritize strategic autonomy in energy, defense, and supply chains. He notes that US corporate investment as a percentage of cash flow has fallen from around 70 percent in the early 1990s to below 40 percent in the current decade. For him, the key question is scarcity—whether a company owns something irreplaceable.
This view is complemented by warnings from strategists like Sebastian Raedler at Bank of America, who cautions that the rise of "Agentic AI" could automate consumption and lead to Western economies facing overcapacity issues similar to China's. In such an environment, business models that can generate near-term profits are favored over those that rely on distant future promises.
While some compare HALO to the "old economy" versus "new economy" debate of the 1990s, proponents like Brown insist it's a new factor for the AI age, encompassing high-tech, high-capex industries like semiconductors alongside traditional heavy industry. The core idea is that in a world of digital abundance, physical scarcity is becoming the ultimate value.
This article is for informational purposes only and does not constitute investment advice.
