Investment in AI-resistant ‘Halo’ companies helps push UK and EU markets to record highs
As the global economy braces for the potential disruptions brought about by artificial intelligence (AI), investors are increasingly turning their attention to a new investment strategy known as the “Halo trade.” This approach emphasizes the value of companies with heavy assets and low obsolescence, which are believed to be more insulated from the rapid changes that AI may bring.
Understanding Halo Companies
The term “Halo” stands for “heavy assets, low obsolescence.” Investors are seeking out businesses that possess substantial physical assets and are less likely to be affected by technological advancements. Examples of Halo companies include those in energy, transport infrastructure, and utilities. These sectors are characterized by their tangible, productive assets that are critical to everyday life and the functioning of the economy.
Market Trends and Performance
Recent reports from Goldman Sachs indicate that the shift towards Halo companies has significantly impacted stock market performance in the UK and Europe. Despite the challenges faced by US mega-cap tech firms at the beginning of 2026, the Halo trade has propelled UK and EU stock markets to record highs.
Goldman Sachs noted that its basket of over 100 capital-intensive companies has outperformed a similar group of capital-light firms by 35% since 2025. This trend highlights the growing importance of asset intensity as a key driver of valuations and returns in the current market environment.
The Shift Towards Physical Assets
After years of under-investment, particularly in Europe, companies are now making a decisive shift back towards physical assets. Goldman Sachs defines Halo businesses as those that combine substantial physical capital with long-term economic relevance. This includes sectors such as:
- Energy grids
- Pipelines
- Utilities
- Transport infrastructure
- Critical machinery
- Long-cycle industrial capacity
Investor Sentiment and Market Dynamics
Ruben Dalfovo, an investment strategist at Saxo, emphasizes that energy infrastructure companies and oil and gas majors that control their entire supply chain are prime examples of Halo companies. He notes that sectors like waste collection, water services, and regulated power networks may not be the most glamorous, but they provide the reliability that investors are increasingly seeking.
The FTSE 100, which is composed largely of traditional economy companies, has experienced a series of record highs in 2026. February marked the index’s strongest month since November 2022, with eight consecutive monthly gains. Analysts attribute this success to a rotation of investments from high-risk AI and growth stocks into more stable businesses with tangible infrastructure and long-lived assets.
Broader Market Impacts
The pan-European Stoxx 600 index has also reached record highs, benefiting from a shift away from US technology stocks into sectors that are perceived as more stable. Companies like Frontline, a Cyprus-based oil tanker shipping firm, have emerged as top performers, with stocks rising by 57% since the start of the year. Similarly, Norway’s Kongsberg Gruppen, which provides high-tech systems to various industries, has seen a 46% increase in its stock price.
Challenges for Technology Companies
In contrast, software and data-focused companies have faced increasing pressure in recent weeks. Reports from analysts, such as those from Citrini Research, have suggested a future where autonomous AI systems could disrupt entire sectors, leading to job losses and a decline in stock market performance. This speculation has rattled investor confidence in tech stocks, further fueling the shift towards Halo investments.
Conclusion
The emergence of the Halo trade represents a significant shift in investor strategy as they seek to navigate the uncertainties posed by AI and other technological advancements. By focusing on companies with heavy assets and low obsolescence, investors are positioning themselves to benefit from the stability and reliability these businesses offer in an ever-evolving economic landscape.
Frequently Asked Questions
Halo companies are defined as businesses that possess substantial physical assets and are less likely to be affected by technological disruptions, particularly from AI. Examples include energy infrastructure, utilities, and transport sectors.
Investors are gravitating towards Halo companies due to their tangible assets and reliability, especially in light of potential disruptions from AI. This shift is seen as a way to mitigate risks associated with more volatile tech stocks.
UK and EU markets have reached record highs as a result of the Halo trade, with indices like the FTSE 100 and Stoxx 600 benefiting from a shift in investment away from high-risk tech stocks towards more stable, capital-intensive businesses.
Note: The information presented in this article is based on market trends and reports as of March 2026 and may be subject to change.
