Key Takeaways
- The hunt for “heavy asset, low obsolescence,” or HALO companies is on amid widespread AI disruption of the software and technology sectors.
- Europe’s ubiquitous asset-heavy industries left it unloved in the recent asset-light era.
- Capital is once again flowing into sectors perceived as structurally insulated from rapid technological advancements.
Europe’s much maligned old-economy industries could emerge as winners of an anti-AI trade, as investors seek to future-proof their portfolios amid technological disruption fears.
The hunt for HALO stocks—Wall Street shorthand for “heavy asset, low obsolescence” companies—is now on in the wake of tech valuation fears and looming artificial intelligence disruption. And, analysts say, Europe could be the ultimate play.
“It’s not what Europe has, it’s what Europe doesn’t have,” says Josh Brown, CEO of Ritholtz Wealth Management, who first coined the term HALO last month.
“What was once a strength of the US stock market—capital-light, low capital intensity businesses with high margins—all of a sudden, in the AI era, seem to work against it,” Brown says, adding that Europe looks “more HALO than the United States.”
Europe: Home of the HALO Stock?
HALO companies refer to those that combine tangible, productive assets seen as less vulnerable to displacement by AI, with enduring real-world applications. Such examples include energy grid operators, transport infrastructure, pipelines, critical machinery and utilities—the types of traditional, stable businesses that make up a relatively large share of the European equity market.
The region’s ubiquitous asset-heavy industries were left unloved for much of the recent asset-light era. But now, capital is once again flowing into sectors perceived as structurally insulated from rapid technological advancements, as tech stocks have come under pressure.
Last month, prior to the Iran war, Goldman Sachs reported that its basket of more than 130 European capital-heavy companies, spanning industrials, basic materials and even luxury, had outperformed its capital-light counterpart by 35% since the start of 2025, as “asset intensity becomes a key driver of valuations and returns.” Such sectors were among the top performers in Europe’s recent earnings season.
Capital rotation out of higher-risk growth stocks and into traditional defensives is typical in periods of uncertainty. But, as concerns mount around AI’s potential ability to displace entire industries, investors are searching for less fully priced options.
“Europe is becoming an unexpected refuge from AI displacement concerns,” Siddhi Purohit, portfolio manager at RBC BlueBay Asset Management, says.
Much of Europe’s HALO appeal has to do with its index weighting. The European market is comprised of around 38% real-asset businesses and 47% services-oriented businesses, compared with the US’s 18% and 67%, respectively, according to RBC’s Purohit, who described that weighting gap as “key.”
“European companies in infrastructure, utilities, and natural resources operate in sectors where AI offers incremental efficiency gains but cannot fundamentally disrupt the business model. You cannot automate away the need for electricity, transportation networks, or minerals,” Purohit says.
Such industries are also typically heavily regulated in Europe, many with government backing and secure revenue streams, Purohit notes. That adds to the barriers to entry enjoyed by HALO stocks—such as time, cost and complexity—and making them difficult, if not impossible, for large language models to replicate.
“AI is unlikely to be able to replace a power generator, or electric grid, nor shorten an infrastructure asset’s life,” Mark Preskett, senior portfolio manager at Morningstar, says.
The Combined Boost of the Anti-AI Trade and a European Infrastructure Spending Push
Investors seeking shelter from AI disruption is one of two major drivers of the rally in European HALO stocks. The second is a wave of public spending on infrastructure resilience in the wake of Russia’s attack on Ukraine—most prominently, Germany’s 2025 fiscal bazooka, which included a EUR 500 billion infrastructure fund.
“What we are now seeing after basically no investment from governments for a very long time is now a ramp up,” Joel Copp-Barton, senior client portfolio manager at Invesco, says.
However, “to right the wrongs of that period doesn’t happen overnight,” according to Copp-Barton. “You’re going to get a lot of investment. You’ve got real interest rates again, you’ve got inflation, and the bit that’s going to benefit most from that is going to be heavy assets.”
Which Stocks Stand to Outperform Despite AI Disruption?
The Iran war has dealt an early blow to the HALO trade, with many capital-intensive businesses affected by higher oil prices. Nevertheless, Europe’s heavy-asset firms remain up for the year, with energy stocks up 41%, utilities up 13%, and mining stocks 4% higher. Technology stocks, meanwhile, are down around 2%.
Norwegian energy company Equinor EQNR is the best-performing member of the Morningstar Europe Index so far this year, up 88%, while oil tanker company Frontline FRO is up 49%.
Indeed, the recent market selloff notwithstanding, Goldman argues that the rotation into capital-intensive stocks has further room to run, with investors still “heavily under-allocated” to such capital-intensive value stocks.
Among the stocks seen as outperforming in Goldman’s capital-intensive basket as of late-February were autos, miners, construction and consumer goods firms, including familiar names such as BMW BMW, Rio Tinto RIO, Holcim HOLN, Kering KER, Eni ENI, Campari CPR, Nestle NESN and Rheinmetall RHM. Those under pressure in its capital light basket feature names in software, travel and services, such as SAP SAP, TUI TUI1 and Adyen ADYEN.
Ritholtz’s Brown, meanwhile, suggests investors pay close attention to the small category of stocks that can play both sides of the AI trade. These are “not only not disruptable by AI, but they’re actually benefiting from the buildout,” he says.
Semiconductor companies, whose products are physical but nevertheless essential to the AI buildout, are one key example, he says, dubbing Dutch chipmaking equipment firm ASML ASML “extremely HALO.” Goldman similarly flagged chipmaker STMicroelectronics STM, and telecoms firms Orange ORA, Vodafone VOD and Telefonica TEF, among its picks.
Other examples include companies that move earth, construct AI data centers, or lay the pipelines to connect those centers to the grid, according to Brown.
“These are all HALO and they’re getting a growth boost by demand from the buildout,” he says. “That’s the sweet spot.”
