AI Build-Out Fuels Demand for Non-Tech HALO Stocks

The rapid ascent of artificial intelligence (AI) technologies is triggering a new investment paradigm in global markets. Following the astronomical gains in chipmakers and AI software companies, attention is now shifting to non-tech companies poised to benefit from the physical build-out of AI infrastructure. Experts suggest that these “HALO” (Hard Assets, Low Obsolescence) companies could emerge as long-term winners of the AI boom.

Bob Robotti, founder and chief investment officer of Robotti & Company Advisors, states that the surging demand for AI infrastructure is creating “incremental demand for real hard assets.” This offers investors a less expensive opportunity to ride the AI wave without solely focusing on highly valued tech giants. Leading financial institutions like Goldman Sachs and Morgan Stanley are also highlighting this trend, which they term the “HALO trade.” These companies typically operate in sectors such as industrials, energy, commodities, utilities, and transportation.

Data centers, servers, and advanced networking infrastructure, all essential for AI systems, require immense capital expenditure. This translates into significant balance sheet growth for companies with strong physical assets. For instance, Finning International (CA:FTT) contributes to the extraction of critical materials like lithium and copper for AI infrastructure through its mining equipment and services. Similarly, companies like Subsea 7 (NO:REACH) provide engineering and construction services for offshore oil fields, addressing the increasing energy demand.

The exorbitant valuations reached by tech companies in recent years have prompted investors to seek more sustainable avenues to capitalize on the AI revolution. A market shift is occurring from “asset-light” business models to those with “heavy assets.” As AI reduces the replication threshold for virtual products, tangible assets rooted in the physical world and difficult to digitally replace are regaining high favor in capital markets. This trend is also interpreted as a “repricing of scarcity.”

The construction of AI infrastructure draws parallels to past major industrial revolutions, such as the transcontinental railways in the 1800s or the interstate highway system in the 1950s. Since AI demands vast quantities of computational power and electricity, the need for fundamental infrastructure like energy grids, water systems, and cooling solutions is escalating. After more than a decade of underinvestment in physical assets, this colossal AI-driven demand is compelling governments and corporations to accelerate spending on critical infrastructure, including energy grids, pipelines, factories, and transportation networks.

Analysts anticipate that this “HALO” investment theme will persist for years to come. Companies in core infrastructure and industrial sectors are expected to maintain strong and durable positions in response to the long-term demand generated by AI. However, investors should remain selective and adhere to fundamental analysis, as these stocks can still be sensitive to macroeconomic factors such as interest rates, inflation, and energy prices. Overall, AI is seen as a long-term narrative transforming not just technology but the entire physical foundation of the economy.