AI-resistant ‘halo’ stocks drive UK and EU markets to record highs
Investors have a new mantra as they prepare for AI to shake up the global economy – the Halo trade.Interest in Halo – short for “heavy assets, low obsolescence” - has risen as investors seek out companies with tangible, productive assets, which might be insulated from AI disruption, such as energy and transport infrastructure companies.While US mega-cap tech companies have had a rough start to 2026, the Halo trade helped to push UK and EU stock markets to record levels by the end of February.Goldman Sachs reported this week that its basket of more than 100 big-spending companies had outperformed a similar grouping of capital-light firms by 35% since 2025, as “asset intensity becomes a key driver of valuations and returns”.“After more than a decade of under‑investment (particularly in Europe), corporates are shifting decisively back toward physical assets,” Goldman analysts told clients.
Goldman defined Halo businesses as ones which pair substantial physical capital (where barriers to replication include cost, regulation, time to build or engineering complexity) with long-lived economic relevance,“Examples include grids, pipelines, utilities, transport infrastructure, critical machinery and long-cycle industrial capacity,” they said,They have calculated that the valuation gap between capital-intensive and capital-light businesses in Europe has narrowed significantly, with capital-intensive firms now more highly rated on a price-to-earnings basis – a key measure of a stock’s performance,Ruben Dalfovo, an investment strategist at Saxo, said energy infrastructure companies and oil and gas majors with control over their entire supply chain are examples of Halo companies, along with “you still need this on Monday morning” businesses, such as utilities,“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,” Dalfovo said,The FTSE 100, which is relatively stacked with old economy companies, has hit a series of record highs in 2026,February was the blue-chip stock index’s strongest month since November 2022, and its eighth monthly gain in a row,“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,” said Ipek Ozkardeskaya, a senior analyst at Swissquote,“In this context, the FTSE 100 is well positioned to benefit from Halo inflows, rallying from record to record, driven by energy and mining names,” Ozkardeskaya added.
The pan-European Stoxx 600 share index also hit record highs last week, helped by a rotation out of US technology stocks into other sectors.Cyprus-based oil tanker shipping company Frontline is the best-performing member of the Stoxx 600 so far this year, up 57%.Norway’s Kongsberg Gruppen, which sells high-tech systems to marine, aerospace, defence and energy producers is up 46% since the start of January.In contrast, software and data-focused companies have come under pressure in recent weeks, as AI companies have added services that threaten their revenue models.Last week, analysts at Citrini Research rattled the markets with a speculative report outlining a future in which autonomous AI systems had upended the entire US economy, from jobs to markets and mortgages, driving up unemployment and hammering the stock market.
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Tell us: how will the UK’s landline switch-off affect you or your family?
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