AI disruption sparks Halo trade as investors flee software for heavy assets and infrastructure

"Anything but AI" is giving rise to the "Halo trade"

Why it matters: It's a counter to the AI scare trade, which has been on a bender this year, steamrolling entire industries based on the flimsiest of evidence that the technology is coming for them. Catch up quick: Software is Exhibit A, with the S&P Software Index down about 20% this month alone. * But similar freak-outs have happened to real estate, IT, cybersecurity and insurance. On Monday, IBM got hit, down 13% after Anthropic spelled out how Claude can modernize legacy code. * DoorDash, the food delivery company, fell 6.6% because of its appearance in a viral "thought exercise" that laid out a doomsday AI scenario. Where it stands: Enter Halo -- "heavy assets, low obsolescence." Coined this month by Josh Brown, CEO of Ritholtz Wealth Management, Halo describes stocks of businesses that are more AI proof. How it works: Investors are used to looking at the market through old paradigms: growth versus value or defensive versus cyclical. * "That's not what's going on now," Brown tells Axios. "Throw all that out." * The new metric: disruptable or not? Follow the money: His go-to example is Delta Air Lines versus Expedia. * Until this year their two stocks were linked to the overall travel sector. Now they've decoupled. (See chart.) * In danger of being replaced by a good AI chatbot, Expedia is down 6% from last year, and Delta is up 8.3%. Zoom in: There's also the practice of digging stuff out of the ground. The S&P Global Mining Index is up over 100% from last year. * Budweiser stock -- left for dead after its "woke" dustup -- is up 48% from last year. You can't drink generative intelligence. Reality check: It's a crude metric. Of course, each Halo stock has a more specific story to tell. Zoom out: Investment banks are on board. Goldman Sachs just launched a new index, SPXXAI, which lets you invest in the S&P 500 benchmark minus all things AI, Axios' Madison Mills reported last week. The big picture: For the past 15 years, investors have been happy to throw money at stocks with "asset-light" business models -- software companies without a lot of labor or infrastructure that reliably brought in a steady stream of recurring revenue through subscriptions. * "We reached a point where people were saying, 'what else would I want to invest in?'" Brown says. * That has totally flipped on its head. "That era just came to an end." Between the lines: Winners and losers will certainly emerge from the carnage, but at the moment, it's hard to see who's who. * Some of the stocks getting battered right now are probably absurdly cheap. Others are never coming back. * "We don't yet know which is which or what the timetable might be," Brown wrote earlier this month. Flashback: It's like when the dot-com bubble burst and investors sprinted away from tech stocks. Back then you couldn't tell which one was Pets.com and which one was Amazon. What to watch: There's no end in sight for the scare trade. There's no clear moment when we'll know if a company is AI-proof or not.

AI Is Rewriting Markets -- And Goldman Says HALO Stocks May Be The Big Winners - First Trust DJ Internet Index Fund (ARCA:FDN), VanEck Gold Miners ETF (ARCA:GDX)

AI Is Rewriting Market Leadership -- Goldman Says HALO Stocks Are The Big Winners Just a couple of years ago, companies that scaled without heavy capital expenditures dominated global equity markets. Growth stocks -- particularly in technology -- commanded persistent valuation premiums. But according to a new Goldman Sachs note from strategists Guillaume Jaisson and Peter Oppenheimer, that era is giving way to something structurally different. What's emerging instead as the new market paradigm is what they call HALO -- Heavy Assets, Low Obsolescence. AI's Dual Shock To Markets Goldman Sachs sees a dual shock from AI. The first is a direct disruption to the Software-as-a-Service, or SaaS, business model. "AI is disrupting many of the traditional new‑economy business models that dominated the past decade," Jaisson said. According to the firm, the recent selloff in Software and IT Services does not reflect an earnings collapse. It reflects a repricing of terminal value and long-term margin durability. The second effect of AI is transforming former capital-light champions into capital intensive giants almost overnight. "The five US hyperscalers have embarked on an unprecedented spending cycle," Goldman Sachs analyst said. Since ChatGPT launched in 2022, U.S. hyperscalers are set to deploy around $1.5 trillion in capital expenditures between 2023 and 2026. Before 2022, they invested roughly $600 billion across their entire history. In 2026 alone, their capex is on track to exceed $650 billion. What Are HALO Stocks? Goldman introduces a framework called HALO: Heavy Assets, Low Obsolescence. HALO companies share two traits. They rely on substantial physical capital with high barriers to replication. They own assets whose economic relevance persists across technological cycles. Examples include transmission grids, pipelines, utilities, transport infrastructure, critical machinery and long-cycle industrial capacity. These businesses are difficult to replicate due to cost, regulation, engineering complexity or time to build. According to Goldman Sachs, utilities, basic resources, energy and telecom stand out as unmistakably capital intensive, built on regulated infrastructure, high fixed investment and long-lived assets with limited obsolescence. At the other extreme, software and IT services, internet, media and digital platform businesses fall squarely into the capital light category, driven more by human capital than physical assets. Industry performance now clearly reflects that rotation: The Data Is Following The Narrative Several forces are reinforcing this rotation: That shift raises a deeper question for investors. If AI compresses margins in software while driving massive physical investment elsewhere, the market's old leadership playbook may not work the same way. Goldman's call suggests the next winners may not be the most scalable. They may be the hardest to replace. Image: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.