A recent report from Goldman Sachs indicates that the 'HALO' investment strategy, which focuses on assets resilient to AI disruption, is entering a more challenging second phase.

The report underscores that in this new stage, companies in the real economy with scarce physical assets, high barriers to entry, and high replacement costs are poised to accelerate profit generation, potentially shifting global capital flows towards Europe, Japan, and select emerging markets.

Goldman's strategists note that, driven by energy security and industrial sovereignty needs arising from geopolitical tensions, a strategy of investing in capital-intensive stocks like oil, gas, and utilities while shorting asset-light companies such as software services has yielded a 20% return year-to-date.

The firm argues that while current market valuations increasingly prioritize actual profitability over price-to-earnings premiums, global investors remain under-allocated to value stocks, and the strategic importance of physical assets, infrastructure, and industrial capacity is not yet fully priced into markets.

The report forecasts that by 2026, capital expenditure in four key sectors—data centers, semiconductors, utilities, and defense—will surge to over 40% of total capital spending, up from 25% in 2022.

Goldman emphasizes that this highly concentrated capital flow reflects deeper cyclical drivers like AI investment, the energy transition, and global re-industrialization, signaling a sustainable infrastructure build-out cycle rather than a short-term sectoral rebound.

From a global market structure perspective, Goldman suggests that as the growth potential of the 'real economy' gradually materializes, Europe, Japan, and some emerging markets, which have not yet fully captured the related benefits, may gain a competitive edge in the next phase.

This dynamic, the report notes, helps explain the relatively strong performance of non-U.S. markets this year, given the U.S. market's continued heavy weighting towards asset-light technology sectors.

Regarding specific sector positioning, Goldman Sachs maintains a 'buy' rating on quality companies within five core HALO themes.

Key Investment Themes

The infrastructure and utilities theme includes companies such as Enel, E.ON, RWE, Veolia, and Naturgy.

The basic materials and bulk energy theme features firms like Shell, BP, Eni, Repsol, Antofagasta, and Air Liquide.

The aerospace and defense theme encompasses Airbus, BAE Systems, Rheinmetall, Rolls-Royce, Melrose, and Safran.

The advanced manufacturing and consumer platforms theme lists Volvo, BMW, Porsche, Nestlé, Heineken, Marks & Spencer, and IAG.

The technology physical layer and hard tech theme includes ASML, ASM International, Infineon, Deutsche Telekom, Orange, BT Group, Telefónica, Telenor, and Telia.