A "Scarce Asset" in the AI ​​Era? Goldman Sachs: HALO – Asset-Heavy, Timeless

Author: Chasing the Wind Trading Platform

As AI products become easier to replicate, the market begins to re-price "hard-to-replicate physical assets" such as power grids, pipelines, infrastructure, and long-term production capacity.

On February 24, Goldman Sachs Global Investment Research released a new report titled "The HALO effect: Heavy Assets, Low Obsolescence in the AI ​​era," which argues that with the combined effects of higher real interest rates, geopolitical fragmentation, supply chain restructuring, and the wave of AI capital expenditure, the core pricing logic of the stock market is shifting from "scalable light asset narratives" to "buildable, irreplaceable physical production capacity and networks."

Goldman Sachs summarizes this change as "scarcity repricing".

• What is HALO?

Goldman Sachs calls these companies HALO , which stands for a combination of " heavy assets" and "low obsolescence ".

• Heavy Assets: Business models built on a large physical capital base have high barriers to replication—such as cost, regulation, construction time, engineering complexity, or difficulty in network integration.

• Low obsolescence: These assets have economic relevance that persists through technology cycles.

Typical examples include power transmission networks, oil and gas pipelines, utilities, transportation infrastructure, critical equipment, and various industrial capacity categories with slower replacement cycles compared to digital innovation.

These types of assets are difficult to create out of thin air. In today's rapidly evolving digital technology landscape, the replacement cycle for such physical assets is extremely slow. Technological innovation cannot easily replace a transnational oil pipeline, nor can code replace a massive national power grid.

Goldman Sachs observes that companies are now decisively returning to physical assets. Production capacity, infrastructure, and long-cycle assets are experiencing an unprecedented return to value.

• Why is the myth of asset-light business coming to an end in the AI ​​era?

Over the past decade, the zero interest rates and ample liquidity following the global financial crisis have fostered business models centered on scalability rather than physical capital. Technology stocks and asset-light industries have enjoyed extremely high valuation premiums.

But this balance has been broken. The rapid rise of artificial intelligence is putting strong "double pressure" on global stock markets.

First, AI is disrupting the "new economy" model that has dominated the past decade, making the "profit margins and terminal value" of some asset-light industries more uncertain. Goldman Sachs bluntly stated: "The AI ​​revolution is questioning the profit margins and end-value of software and IT services."

The report specifically names the software, IT services, publishing, gaming, logistics platforms, and even asset management industries, stating that their competitive advantages are being reassessed. Goldman Sachs put it bluntly: "The recent significant devaluation of software and IT services is not due to a short-term profit collapse, but rather the market is repricing terminal value and profit margin durability—historically high profitability is seen as more vulnerable to competitive erosion."

In other words, while AI reduces information processing costs, it also compresses differentiation, and the market is beginning to be more cautious in scoring long-term cash flow.

Secondly, AI is reshaping the landscape of capital spending. Goldman Sachs points out: "AI is also turning some of the most iconic 'asset-light' winners into the largest capital spenders in history."

To maintain their lead in the race for fundamental large-scale models and computing power, the five major US tech giants have embarked on an unprecedented investment cycle. Data shows that since the launch of ChatGPT in 2022, these giants will spend approximately $1.5 trillion in capital expenditures (Capex) between 2023 and 2026. In comparison, they invested a total of only about $600 billion throughout their entire development history prior to 2022.

Even more striking is that these giants' capital expenditures are expected to exceed $650 billion in 2026 alone. This means that the investment in a single year will surpass their total historical investment before the advent of the AI ​​era. This is the largest and most rapid capital expenditure cycle in the history of technology.

This means two things: First, "computing infrastructure" itself is a typical physical asset cycle; second, AI has not made the world lighter, but rather has enabled more industrial chains to benefit from the ability to "build, supply, and deliver".

When tech giants become "asset-heavy" infrastructure behemoths, the market's belief in the superiority of "asset-light" approaches naturally wavers.

The market is rewarding HALO with real money.

Investors have a keen sense of opportunity. The performance difference between Goldman Sachs' "heavy asset portfolio" (GSSTCAPI) and "light asset portfolio" (GSSTCAPL) provides the most intuitive answer from the market.

Data shows that asset intensity has become a core driver of valuation and returns. Goldman Sachs revealed in a report: " Since 2025, our new asset-heavy portfolio (GSSTCAPI) has outperformed the asset-light portfolio (GSSTCAPL) by 35%. "

This outperformance is not just about relative stock price fluctuations, but also about the convergence of valuation logic.

In the early 2020s, as the market viewed many old economy companies as "structural value traps," European growth stocks were valued at more than double that of value stocks, with a premium as high as 150%. But today, the valuation gap between asset-heavy and asset-light companies has narrowed dramatically.

What investors should pay more attention to is the way valuations are converging. Goldman Sachs points out that the valuations of the two are currently almost at the same level, but this convergence is "more driven by the revaluation of asset-heavy companies than by a comprehensive downgrade of asset-light companies. "

Aside from the weakness in some asset-light sectors like software, which are directly exposed to the disruptive risks of AI, the overall market evolution has been as follows: asset-heavy companies have proactively raised their valuations to match the valuation levels of their asset-light counterparts. This indicates that market funds are actively paying a premium for the resilience and strategic value of real economy assets.

How to define "asset-heavy"? An examination of six core indicators.

To penetrate traditional industry classifications and accurately identify assets truly reliant on real capital, Goldman Sachs abandoned a single indicator and instead constructed a comprehensive "capital intensity score" system comprising six indicators. This system profoundly reflects a new perspective in the market's assessment of asset quality.

1. Tangible asset intensity (net physical operating assets/sales): The higher the value, the heavier the physical foundation required to generate every dollar of revenue.

2. Fixed asset intensity (plant and equipment/sales revenue): reflects the degree to which a company relies on physical bricks and tiles.

3. Fixed assets share (plant and equipment/total assets): reveals how much of the company's capital is "locked up" in long-term physical assets.

4. Capital-labor ratio (tangible assets/number of employees): distinguishes whether a business is driven by machines or by sheer numbers of employees.

5. Capital expenditure intensity (Capex/sales): measures the percentage of capital required annually to maintain or expand a business.

6. Capital expenditure burden (Capex/EBITDA): This shows the extent to which operating cash profits are eroded by asset maintenance.

By scanning these six dimensions, Goldman Sachs divided companies into distinctly different camps.

Utilities, basic resources, energy, and telecommunications undoubtedly remain in the heavy asset category. These industries are heavily regulated, have extremely high fixed capital requirements, and very long asset lifespans.

Conversely, platform companies such as software, IT services, internet, and media are firmly categorized as asset-light and human capital-intensive.

Interestingly, there's a "middle ground" in the market. Goldman Sachs found that while automobiles and aviation are clearly asset-heavy, luxury goods and beverages also fall into the "low obsolescence" category of high-quality assets due to brand equity, manufacturing know-how, and long-term investments in craftsmanship. In contrast, consumer services, gaming, and most retailers are structurally asset-light, with their economic lifeline lying in labor and marketing rather than physical capital.

The resonance between macroeconomic favorable conditions and performance momentum

Why is there a surge in heavy asset investment at this juncture? The answer lies in the combined effect of macroeconomic indicators and corporate fundamentals.

On the interest rate front, asset-heavy stocks tend to perform well during periods of higher interest rates. This is because high yields ruthlessly compress the valuations of long-duration, asset-light growth companies. Conversely, asset-heavy sectors linked to tangible production capacity benefit from stronger nominal economic activity and government spending. Goldman Sachs notes that the current policy mix is ​​guiding capital flows towards real assets, " creating a structural tailwind for capital-intensive companies. "

At the macroeconomic cycle level, the interplay between manufacturing and services is a key indicator. The fate of asset-heavy sectors is closely linked to industrial production and capital expenditure cycles. Goldman Sachs observes that as the manufacturing PMI (especially the future business expectations component) rebounds and surpasses the services PMI, the macroeconomic backdrop is once again tilting towards asset-heavy industries.

On the earnings side, which determines the long-term performance of the stock market, the balance of fundamentals has also shifted.

In the past cycle, asset-light companies enjoyed a long-term valuation premium thanks to their consistently high profit growth. However, after entering 2025, although the short-term profits of asset-heavy companies have been affected by trade friction factors such as tariffs (as commodity producers and export-oriented companies, they are far more affected by tariffs than service industries), the trend is clear after removing short-term noise.

Goldman Sachs emphasized: " Earnings momentum for asset-heavy companies has recently turned positive, and consensus forecasts are being revised upwards; while earnings forecasts for asset-light companies have been revised downwards. "

Looking ahead, analysts' consensus predicts that the compound annual growth rate (CAGR) of EPS for asset-heavy portfolios will reach 14% over the next few years, while that for asset-light portfolios will be only 10% . More critically, the core metric that has long supported the high valuations of asset-light companies—Return on Equity (ROE)—is showing signs of weakness. The market currently expects the ROE of asset-light companies to remain flat, while the ROE of asset-heavy companies is expected to continue to improve.

Capital congestion: The rotation towards heavy assets has only just begun.

Given that the logic is so clear and valuations have converged, has this wave of heavy asset-heavy market rally come to an end?

From the perspective of financial games, it's far from over.

The recent surge in heavyweight stocks is closely related to the market's strong desire to shed its crowded and expensive "US tech stock" holdings. Over the past 12 months, European value funds have seen a 3% net inflow, while growth funds have experienced a 9% net outflow.

However, Goldman Sachs pointed out incisively that despite the sharp short-term rotation, long-term funds remain very thinly positioned: " European value funds have seen cumulative net outflows from growth funds hovering around -40% of their assets under management. "

This means that global investors remain significantly underweight in value stocks (where heavy assets are concentrated). Given this substantial position gap, the structural logic that heavy asset stocks will continue to outperform light asset stocks remains rock solid.

In this era of accelerated restructuring by AI, the rapid advancement of the virtual world has ironically made the steel, pipes, and power grids of the physical world more precious than ever before. Whether this is a prolonged shift in market leaders or a rebalancing within a cycle, the "bulletproof vest" properties of physical capital are radiating an undeniable brilliance for investors.