Key Takeaways
- The UK stock market is dominated by asset-heavy sectors like energy, mining and industrials, which are seen as a counterpoint to the AI-driven tech boom.
- These tangible companies can also benefit from the rollout of AI technology and high energy demand.
- But energy and mining stocks are richly valued and exposed to geopolitical risk.
The ‘old economy’ nature of the UK equity market has been given fresh appeal after a surge in investors hunting for stocks that can provide protection against AI disruption.
HALO, or heavy asset, low obsolescence, stocks are built on a durable, asset intensive business model which is unlikely to be displaced by AI, such as energy and mining companies.
The search for HALO stocks has entered the investing conversation in 2026, largely in the wake of the AI disruption-induced software stock selloff in February, with investors now increasingly looking for stocks and sectors that can offer diversification away from one of the biggest themes in recent years.
As well as providing an investor alternative to AI stocks, these companies can benefit from the spike in energy demand as these technologies are rolled out.
“Following decades of underinvestment, sectors like power, manufacturing and industrial equipment are poised to be the real beneficiaries of AI’s immense physical footprint,” says JOHCM UK Dynamic fund manager Tom Matthews.
UK equity indexes are more skewed toward these tangible sectors than most global indexes, Matthews explains and adds that low US tariff rates also offer “valuable geopolitical insulation.”
While financial services form the largest sector in the Morningstar UK Index, accounting for almost a quarter of the market, the UK also has a significant weighting to HALO sectors like industrials, energy, basic materials and utilities.
How ‘AI-Proof’ Are UK Stocks?
HALO companies are built on durable, hard to replicate infrastructure rather than fast-moving tech.
These long‑life assets often deliver stable cash flows, high barriers to entry, and reliable dividends, making them increasingly attractive in uncertain markets, according to JM Finn investment director Andrew Mann.
“With the energy transition and ongoing global demand for essential infrastructure, HALO offers a steady counterpoint to the volatility of high‑growth technology, and the dominance of energy, financials and commodities within the FTSE 100 could well make this an attractive proposition for investors over the coming years,” he says.
So far the rotation into less tech-exposed stocks has borne fruit, with the FTSE 100 up 30% since the start of 2025. Despite the March 2026 selloff, the index was up just shy of 10% in the first two months of 2026 before the Iran war knocked back some of the gains, with the index still 5% higher year to date.
The Iran War and Risks to the HALO Trade
While the trade is seen as a defense against AI, fund managers say that HALO stocks come with their own set of risks.
Paul Middleton, senior global equities portfolio manager at Mirabaud Asset Management, says one of the clear biases of the HALO trade is toward more cyclical areas of the market, which have been hit by the Middle East conflict.
“If the war does not end soon, there will be downward pressure on industrial earnings, which will lead to poor stock performance in these areas regardless of HALO status,” he says.
Energy and mining stocks are a prime example of an ‘AI-proof’ sector, given that language model Claude is unlikely to replicate physical energy infrastructure. However, the HALO appeal doesn’t necessarily make the sector attractive to investors.
“The problem is valuations have already accounted for this to a large degree,” says Morningstar’s Field.
“Even before the Middle Eastern crisis, energy stocks were trading at a premium to our fair value estimate.”
The sector is a primary reason for the FTSE 100’s lower AI risk compared with global indexes, notes Tom Wildgoose, senior portfolio manager for global equities at Sarasin & Partners.
“However, these sectors introduce macroeconomic risk in the form of supply/demand imbalances, as well as considerable geopolitical risk, both of which can move commodity prices significantly,” he says. “For example, a resolution to the war in Iran would likely cause the oil price, and oil and gas stocks, to fall.”
While ‘AI-proof’ stocks can make for a compelling narrative, JOHCM’s Matthews says investors should not seek out stocks solely for their HALO appeal.
“In times of deep uncertainty, investors must focus on probabilities, not narratives. Instead of being lulled into binary ‘AI winner or loser’ categorizations, investors should inspect their margins of safety: What does a share price imply about the likelihood of a company’s future cash flows?
“This is where UK equities really shine, offering a list of world-leading franchises at a steep discount to global peers.”
