Inc. Magazine
Fears of an AI stock bubble are pushing investors toward “HALO” stocks—asset heavy companies like McDonalds and Exxon Mobil—while tech firms face sharp swings ahead of key earnings from Nvidia and others.
Investors Are Fleeing Big Tech for These AI-Proof Industries
Author: Kevin Haynes
Investor jitters over a potential bubble in this decade’s artificial-intelligence boom are paying off for old-school companies whose survival isn’t inextricably linked to Big Tech.
The Wall Street Journal reports that perennial blue chips like McDonalds and Exxon Mobil have increased nearly 10 percent in the past month as part of a new investment strategy dubbed HALO—Heavy Assets, Low (chance of) Obsolescence.
“These are the companies that you cannot type something in a prompt and disrupt,” says the investment guru who coined the acronym, Josh Brown, chief executive of Ritholtz Wealth Management. “Whenever there’s a wave of uncertainty, all of the things that people were confident about require a repricing.”
Case in point: AI kingpin Anthropic’s recent introduction of tools designed to automate legal and research tasks quickly wiped out $300 billion in value from sectors that once relied solely on human programming, including software and financial data. Shares of insurance brokers and real estate companies soon followed suit.
Meanwhile, investors have taken shelter in companies with significant tangible assets that are unlikely to be replaced by AI, ranging from Caterpillar and Coca-Cola to FedEx and Walmart.
“What I see is investors hiding out,” said Jed Ellerbroek, portfolio manager at Argent Capital Management.
Whether the smart money continues to hide remains to be seen. Tech shares rebounded slightly last week, with the Nasdaq outperforming the Dow industrials, led by data-storage providers Seagate and Western Digital. And JP Morgan notes that tech stars Microsoft, Amazon, and Palantir continue to rank among the main attractions for individual investors.
The next bellwether for AI and HALO stocks is likely to come on Wednesday, when Nvidia reports earnings. Quarterly reports are also coming from software firms Salesforce and Workday and DIY giant Home Depot.
The stock market’s seesawing prices amid growing concerns that Big Tech’s lavish spending on new infrastructure will never pay off may soon find the industry at a crossroads. Wall Street could very well decide it’s time to narrow the spigot to AI ventures and pump up the flow to HALO companies.
“I do think we’re in a new chapter, and I think that chapter is going to be defined by companies proving it,” said Argent’s Ellerbroek. “Hype isn’t cutting it anymore.”
Credits: TCA, LLC.