"Scarce Assets" in the AI Era? Goldman Sachs: HALO—Heavy Assets, Not Outdated

Author: Zui Feng Trading Platform

As AI products become easier to replicate, the market is beginning to reprice “hard-to-copy tangible assets” such as power grids, pipelines, infrastructure, and long-term capacity.

On February 24, Goldman Sachs Global Investment Research released its latest report, “The HALO Effect: Heavy Assets, Low Obsolescence in the AI Era,” which states: Under the combined effects of higher real interest rates, geopolitical fragmentation, supply chain restructuring, and the wave of AI capital expenditure, the core valuation logic of the stock market is shifting from an “expansible light-asset narrative” to “buildable, hard-to-replace tangible capacity and networks.”

Goldman summarizes this change as a “repricing of scarcity.”

“Higher real yields, geopolitical fragmentation, and supply chain restructuring are pulling stock leadership back into tangible productive assets. The market is rewarding capacity, networks, infrastructure, and engineering complexity—assets that are costly to replicate and less easily displaced by technology.”

• What is HALO?

Goldman calls these companies HALO, referring to the combination of “heavy assets” and “low obsolescence,” i.e., Heavy Assets, Low Obsolescence.

• Heavy Assets: Business models built on substantial physical capital, with high barriers to replication—such as costs, regulations, construction time, engineering complexity, or network integration difficulty.
• Low Obsolescence: These assets maintain economic relevance across technological cycles and persist over time.

Typical examples include power transmission grids, oil and gas pipelines, utilities, transportation infrastructure, key equipment, and various industrial capacities with slower replacement cycles compared to digital innovation.

These assets are difficult to create from scratch. In today’s rapidly evolving digital landscape, the replacement cycles for such physical assets are extremely slow. Technological innovation cannot easily replace a transnational oil pipeline or a vast national power grid with code.

Goldman observes that companies are decisively returning to tangible assets. Capacity, infrastructure, and long-cycle assets are experiencing an unprecedented resurgence in value.

• Why is the light-asset myth ending in the AI era?

Over the past decade, zero interest rates and abundant liquidity following the global financial crisis fostered a business model centered on scalability rather than physical capital. Tech stocks and light-asset industries enjoyed high valuation premiums.

But this balance has been disrupted. The rapid rise of AI is exerting a strong “dual pressure” on global equities.

First, AI is disrupting the dominant “new economy” model of the past decade, making the profit margins and terminal values of some light-asset industries more uncertain. Goldman bluntly states: “The AI revolution is calling into question the profit margins and terminal value of software and IT services.”

The report highlights software, IT services, publishing, gaming, logistics platforms, and even asset management industries, noting that their moats are being reevaluated. Goldman’s straightforward expression: “Software and IT services have recently been devalued significantly, not because of short-term profit collapses, but because the market is re-pricing terminal value and profit durability—historically high profitability is now seen as more vulnerable to competition.”

In other words, AI reduces information processing costs and compresses differentiation, prompting the market to be more cautious in assigning long-term cash flow valuations.

Second, AI is reshaping capital expenditure patterns. Goldman points out: “AI is simultaneously turning some of the most iconic ‘light-asset’ winners into the largest capital spenders in history.”

To stay ahead in large model and computing power races, the five major US tech giants have embarked on unprecedented investment cycles. Data shows that since the release of ChatGPT in 2022, these giants will spend about $1.5 trillion on capital expenditures (Capex) from 2023 to 2026. In comparison, their entire pre-2022 history of development involved roughly $600 billion.

Even more striking, in 2026 alone, their Capex is expected to exceed $650 billion. This single-year investment will surpass their total pre-AI era history, marking the largest and fastest capital expenditure cycle in tech history.

This implies two things: First, “computing infrastructure” itself is a typical physical asset cycle; second, AI has not made the world lighter—instead, it benefits more industries that can build, supply, and deliver.

As tech giants become “heavy infrastructure builders,” market faith in the superiority of “light assets” naturally wanes.

Markets are rewarding HALO with real money

Investors are highly perceptive. The performance gap between Goldman’s “heavy asset” portfolio (GSSTCAPI) and “light asset” portfolio (GSSTCAPL) provides the most direct market answer.

Data shows that asset intensity has become a core driver of valuation and returns. Goldman reveals: “Since 2025, our new heavy asset portfolio (GSSTCAPI) has outperformed the light asset portfolio (GSSTCAPL) by 35%.”

This outperformance is not just about relative stock price movements but reflects a convergence in valuation logic.

In the early 2020s, as the market viewed many old economy companies as “structural value traps,” European growth stocks once traded at more than twice the valuation of value stocks, with a premium of over 150%. But now, the valuation gap between heavy and light assets has sharply narrowed.

More importantly, the way valuations converge is noteworthy. Goldman points out that both are now nearly at the same level, but this “more reflects a revaluation of heavy asset companies rather than a broad downward adjustment of light asset companies.”

Apart from some softening in certain light-asset sectors directly exposed to AI disruption, the overall market evolution is: heavy asset companies actively raising their valuations to match lighter peers. This indicates that market capital is actively paying a premium for the resilience and strategic value of tangible assets.

Defining “Heavy Assets”: Six core indicators

To go beyond traditional industry classifications and accurately identify truly tangible-capital-dependent targets, Goldman abandons a single metric and constructs a comprehensive “capital intensity score” based on six indicators. This system offers a profound new perspective on asset quality assessment.

1. Tangible Asset Intensity (Net tangible operating assets / sales): The higher the value, the more substantial the physical base required to generate each dollar of revenue.
2. Fixed Asset Intensity (Plant & equipment / sales): Reflects dependence on physical infrastructure.
3. Fixed Asset Share (Plant & equipment / total assets): Reveals how much of the company’s assets are “locked” in long-term tangible assets.
4. Capital-Labor Ratio (Tangible assets / number of employees): Differentiates between machine-driven and labor-driven businesses.
5. Capex Intensity (Capex / sales): Measures the annual capital outlay needed to maintain or expand operations.
6. Capex Burden (Capex / EBITDA): Shows how much operating cash profit is consumed by asset maintenance.

By analyzing these six dimensions, Goldman classifies companies into distinct camps.

Utilities, basic resources, energy, and telecoms unsurprisingly cluster in the heavy asset camp. These industries are heavily regulated, require high fixed capital, and have long asset lifespans.

Conversely, software, IT services, internet, and media platform companies are firmly in the light-asset, labor-intensive category.

An interesting “middle ground” emerges in the market. Goldman finds that automakers and aerospace are clearly heavy assets; however, due to brand value, manufacturing expertise, and long-term investments, luxury goods and beverages also fall into the “low obsolescence” high-quality asset category. In contrast, consumer services, gambling, and most retailers are structural light assets, with their economic core relying on labor and marketing rather than physical capital.

Macro winds and performance momentum

Why are heavy assets exploding now? The answer lies in the macroeconomic indicators and corporate fundamentals resonating together.

On the interest rate front, heavy asset stocks tend to perform well in higher-rate environments. Because high yields ruthlessly compress valuations of long-duration, light-asset growth companies. In contrast, tangible capacity sectors benefit from stronger nominal economic activity and government fiscal spending. Goldman notes that current policies are directing capital toward tangible assets, creating a “structural tailwind” for capital-intensive firms.

On the macro cycle front, the tug-of-war between manufacturing and services is a key indicator. The fate of heavy asset sectors is closely tied to industrial production and capital expenditure cycles. Goldman observes that as manufacturing PMI (especially future business expectations) rebounds and surpasses services PMI, macro conditions again favor heavy assets.

Furthermore, the fundamental profitability outlook has shifted.

In the previous cycle, light-asset companies enjoyed long-term valuation premiums due to sustained high earnings growth. But from 2025 onward, despite short-term profit disruptions caused by tariffs and trade frictions (which impact commodity producers and export-oriented firms more than services), the trend is clear once short-term noise is stripped away.

Goldman emphasizes: “The earnings momentum of heavy asset companies has recently turned positive, with consensus expectations being revised upward; meanwhile, profit expectations for light asset companies are being downgraded.”

Looking ahead, analyst consensus expects the EPS compound annual growth rate (CAGR) of heavy asset portfolios over the next few years to reach 14%, compared to only 10% for light assets. More critically, the core metric supporting high valuation for light assets—return on equity (ROE)—is showing signs of fatigue. The market currently expects ROE for light asset companies to remain flat, while ROE for heavy assets is poised for continued improvement.

Capital crowding: the rotation toward heavy assets has just begun

Given the clear logic and valuation convergence, has the heavy asset rally already peaked?

From a capital allocation perspective, the answer is no.

Recent outperformance of heavy assets is closely linked to market funds’ strong desire to escape crowded and expensive “US tech stocks.” Over the past 12 months, European value funds saw a 3% net inflow, while growth funds experienced a 9% net outflow.

But Goldman sharply points out that, despite short-term rotations, long-term positions remain very thin: “The cumulative net outflow from European value funds compared to growth funds still hovers around -40% of assets under management.”

This indicates that global investors remain severely underweight value stocks (the core of heavy assets). Given this huge position gap, the structural logic that heavy assets will continue to outperform light assets remains solid.

In this AI-accelerated reconstruction era, the frenzy in virtual worlds makes the physical world’s steel, pipelines, and power grids more valuable than ever. Whether this is a lasting leadership shift or a cyclical rebalancing, for investors, the “bulletproof” nature of tangible capital is radiating an undeniable glow.