Is the AI revolution actually a boon for old-school industries? As artificial intelligence continues its rapid ascent, promising to reshape economies, investors are adopting a new strategy to navigate the potential disruptions. This approach, dubbed the 'Halo trade,' is all about finding companies that are built to last, with substantial physical assets that are less susceptible to the rapid obsolescence often associated with technological advancements. Think of it as an investment in the bedrock of our economy – the things we physically need and use every day.
But here's where it gets controversial... While the dazzling world of AI and tech giants has captured headlines, it's these 'heavy assets, low obsolescence' (Halo) companies that have been quietly driving UK and EU markets to unprecedented heights. This is a stark contrast to the early part of 2026, which saw US mega-cap tech companies facing some turbulence. The Halo trade, by focusing on companies with tangible, productive assets like energy and transport infrastructure, has offered a seemingly robust shield against AI disruption.
Goldman Sachs recently highlighted this trend, reporting that their curated basket of over 100 capital-intensive companies has significantly outperformed their capital-light counterparts by a remarkable 35% since 2025. Their analysis suggests that 'asset intensity is becoming a key driver of valuations and returns.' This is a significant shift, especially considering that, according to Goldman analysts, 'after more than a decade of under-investment (particularly in Europe), corporates are shifting decisively back toward physical assets.'
So, what exactly constitutes a Halo business? Goldman Sachs defines them as companies that possess substantial physical capital, where the barriers to replication are considerable. These barriers can include high costs, stringent regulations, lengthy construction times, or complex engineering requirements. Crucially, these businesses also boast long-lived economic relevance. Examples cited include essential services like grids, pipelines, utilities, transport infrastructure, critical machinery, and long-cycle industrial capacity.
And this is the part most people miss... The valuation gap between capital-intensive and capital-light businesses in Europe has dramatically narrowed. In fact, capital-intensive firms are now being rated more highly on a price-to-earnings basis – a crucial metric for assessing stock performance. This suggests a fundamental re-evaluation of what constitutes a valuable investment in the current economic climate.
Ruben Dalfovo, an investment strategist at Saxo, further elaborates on this, pointing to energy infrastructure companies and oil and gas majors that control their entire supply chains as prime examples of Halo companies. He also includes businesses that are essential for daily life, the 'you still need this on Monday morning' types, such as utilities. Dalfovo notes, 'Waste collection, water services, and regulated power networks rarely dominate dinner party chat. They tend to show up when investors stop paying for excitement and start paying for reliability.' This sentiment underscores a move towards valuing dependability and essential services over speculative growth.
The FTSE 100, which is notably composed of many 'old economy' companies, has indeed hit a series of record highs in 2026. February proved to be its strongest month since November 2022, marking its eighth consecutive monthly gain. Ipek Ozkardeskaya, a senior analyst at Swissquote, observes, 'Investors are rotating from expensive AI and growth stocks into businesses with tangible infrastructure and long-lived assets – energy, materials, industrials, shipping, and other ‘real world’ enterprises.' She believes the FTSE 100 is exceptionally well-positioned to attract these 'Halo inflows,' with energy and mining sectors leading the charge.
Similarly, the pan-European Stoxx 600 share index has also reached record highs, partly fueled by this rotation away from US technology stocks. Companies like Frontline, a Cyprus-based oil tanker shipping company, have seen impressive gains of 57% year-to-date, making it the best performer in the Stoxx 600. Norway's Kongsberg Gruppen, which supplies high-tech systems to marine, aerospace, defense, and energy sectors, is up 46% since January.
In stark contrast, software and data-focused companies have faced pressure recently. This is because AI companies are increasingly offering services that directly compete with and threaten their established revenue models. A recent speculative report from Citrini Research even painted a picture of autonomous AI systems completely upending the US economy, potentially leading to widespread unemployment and a significant stock market downturn. Is this the future we should brace for, or is the resilience of tangible assets a more reliable bet? What are your thoughts on this shift in investment strategy? Do you agree that essential services and infrastructure are the true safe havens in an AI-driven world?
