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 Goldman Sachs: HALO—Heavy Assets, Not Outdated

Author: Chasing Wind Trading Desk

As AI products become easier to replicate, the market is beginning to reprice “hard-to-copy physical assets” like 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: Amid rising real interest rates, geopolitical fragmentation, supply chain restructuring, and a wave of AI capital expenditure, the core valuation logic of the stock market is shifting from a “scalable light-asset narrative” to “buildable, hard-to-replace physical 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 toward tangible productive assets. The market is rewarding capacity, networks, infrastructure, and engineering complexity—assets that are costly to replicate and less susceptible to technological obsolescence.”

What is HALO?

Goldman calls these companies HALO, referring to the combination of “Heavy Assets” and “Low Obsolescence.”

Heavy Assets: Business models built on substantial physical capital, with high barriers to replication—such as costs, regulation, construction time, engineering complexity, or network integration difficulty.

Low Obsolescence: These assets maintain economic relevance across technological cycles and endure over time.

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

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 powerful “dual pressure” on global stock markets.

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

The report specifically mentions software, IT services, publishing, gaming, logistics platforms, and even asset management, noting that their moats are being reevaluated. Goldman straightforwardly says: “Recent devaluation of software and IT services is not due to short-term profit collapse but reflects market re-pricing of terminal value and profit durability—once considered highly profitable, these are now seen as more vulnerable to competition.”

In other words, AI reduces information processing costs and compresses differentiation, leading markets 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 foundational large models and compute power races, the five major US tech giants have embarked on unprecedented investment cycles. Data shows that since the launch of ChatGPT in 2022, their capital expenditures (Capex) from 2023 to 2026 will total approximately $1.5 trillion. In comparison, their entire pre-2022 history of development involved about $600 billion in Capex.

Even more striking, in 2026 alone, these giants are expected to spend over $650 billion. This single year’s investment will surpass their total pre-AI era capital spending. It’s the largest and fastest capital expenditure cycle in tech history.

This implies two things: first, “compute infrastructure” is a classic physical asset cycle; second, AI has not made the world lighter—in fact, it benefits many industries that can build, supply, and deliver.

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

Markets are rewarding HALO with real money

Investors are highly perceptive. The performance difference between Goldman’s “Heavy Asset Portfolio” (GSSTCAPI) and “Light Asset Portfolio” (GSSTCAPL) provides the clearest 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 relative stock price fluctuation but reflects valuation convergence.

In the early 2020s, as many old-economy companies were viewed 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 are converging is notable. Goldman states that both are now valued at nearly 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 sectors directly exposed to AI disruption, like software, the overall market trend 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.

How to define “Heavy Assets”? Six core indicators

To go beyond traditional industry classifications and accurately identify truly physical-capital-dependent targets, Goldman has abandoned a single metric and developed a comprehensive “Capital Intensity Score” based on six indicators. This system offers a profound new perspective on asset quality.

Tangible Asset Intensity (Net Operating Assets / Sales): The higher the ratio, the heavier the physical base needed to generate each dollar of revenue.

Fixed Asset Intensity (Plant & Equipment / Sales): Reflects dependence on physical infrastructure.

Fixed Asset Share (Plant & Equipment / Total Assets): Shows how much of a company’s balance sheet is “locked” in long-term physical assets.

Capital-Labor Ratio (Tangible Assets / Employees): Differentiates between machine-driven and labor-driven businesses.

Capex Intensity (Capex / Sales): Measures the proportion of annual spending needed to maintain or expand operations.

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 sectors 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.

Interestingly, there are “middle ground” sectors. Goldman finds that automotive and aerospace are clearly heavy assets; but due to brand value, manufacturing expertise, and long-term investments, luxury goods and beverages also fall into the “low obsolescence” high-quality asset class. 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 trends and performance momentum resonate

Why are heavy assets exploding now? The answer lies in the dual resonance of macroeconomic indicators and corporate fundamentals.

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. Conversely, 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 outlook) rebounds and surpasses services PMI, the macro environment again favors heavy assets.

And on the earnings front, which determines long-term stock market performance, the fundamentals are shifting.

In the previous cycle, light-asset companies enjoyed long-term valuation premiums thanks to sustained high profits. But from 2025 onward, despite short-term profit disruptions from 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: “Profit momentum for heavy-asset companies has recently turned positive, with consensus expectations rising; while profit expectations for light-asset companies are being downgraded.”

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

Capital crowding: the rotation toward heavy assets has just begun

Given the clear logic and valuation convergence, is this wave of heavy-asset rally already over?

From a capital market perspective, not at all.

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 rotation, long-term positions remain very thin: “European value funds’ cumulative net outflow compared to growth funds still hovers around -40% of assets under management.”

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

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