How the Halo trade is positioning to buy what AI can’t replace

A new equity market split is forming, and the smart money is already on one side of it. Investors are shying away from companies AI will most likely disrupt, including software, payments, and consumer platforms, and investing in companies AI can’t easily replace: heavy industrials, freight, energy, and consumer staples.

The trade has a name: “Heavy assets, low obsolescence,” also known as Halo, is a term coined last February by Ritholtz Wealth Management CEO Josh Brown and now incorporated into investment research being carried out this year at both Goldman Sachs and Morgan Stanley, CNBC reported Sunday.

The performance gap is real. FedEx and ExxonMobil are up close to 30% YTD, and Coca-Cola is up around 17%. On the other side of the split, Adobe, ServiceNow, and Salesforce have drifted to 52-week lows as investors reassess software exposure to AI disruption. Roundhill Investments launched a Halo ETF last week with top holdings in Cummins, AutoZone, CSX, JB Hunt, and Lennox — companies that, as Brown put it, “are 100-years-old.”

The new ETF launched 43 days after Roundhill’s Dram ETF hit USD 9.8 bn in AUM — the fastest in ETF history — capturing the AI-memory bottleneck trade from the other direction.

Why this matters: GCC sovereign wealth funds and Egyptian institutional investors have been heavily positioned on the wrong side of the Halo split. Years of building US exposure through the consensus growth trade — Amazon, Visa, Mastercard, software platforms, consumer payments — left the regional capital base concentrated in exactly the cohort the Halo thesis flags as AI-disruptable.

PIF’s 1Q 13F filing last week shows the fund already executed the switch in stealth mode. Just four US-listed positions remain standing, including Uber, Electronic Arts, Lucid, and Clarivate, all of which fit the Halo profile. The fund’s US book shrank from 36 positions and USD 56.7 bn in 4Q 2021 to four positions and USD 12 bn this quarter.

The harder read: PIF changed the playbook a year early, but the rest of the GCC sovereign wealth funds have not. Mubadala, Adia, ADQ, and QIA all still carry exposure across a cohort now being flagged as structurally vulnerable — and the same logic extends to Egyptian, Saudi, and UAE-listed ins., pension, and family-office portfolios that have built US equity exposure through the same consensus playbook.

What’s next: The AI trade most people are watching is the one with Nvidia’s name on it. The other AI trade — the one Brown, Goldman, Morgan Stanley, and PIF are all positioned for — is rotating capital toward the companies and assets that AI can’t replace.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning, but we expect them to inch higher as the day unfolds and investors react to US President Donald Trump’s decision to postpone a planned attack on Iran. Japan’s Nikkei is flat, while South Korea’s Kospi is down over 3%.

THE CLOSING BELL: TADAWUL-

TheTASIfell 0.1% yesterday on turnover of SAR 4.6 bn. The index is up 4.4% YTD.

In the green: Tadco (+5.7%), Saudi Chemical (+4.2%), and East Pipes (+3.7%).

In the red: Cenomi Retail (-7.7%), 2P (-6.2%), and Thimar (-5.6%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.5% yesterday on turnover of SAR 16.6 mn. The index is down 2.5% YTD.

In the green: Leaf Global (+5.4%), Asas Makeen (+5.0%), and Albattal Factory (+4.5%).

In the red: Taqat (-9.6%), Meyar (-8.6%), and Service Equipment (-7.4%).