European Halo Stocks Attract Global Capital

A shift in investor strategy towards asset-heavy companies has propelled UK and European equity markets to record levels, signalling a reallocation of capital within developed markets.

Interest in so-called Halo stocks, defined by Goldman Sachs as companies combining heavy physical assets with low obsolescence risk, has strengthened as investors position for potential disruption from artificial intelligence. According to Goldman, its basket of more than 100 capital-intensive companies has outperformed a comparable group of capital-light firms by 35 per cent since 2025. The bank attributes the trend to asset intensity becoming a key driver of valuations and returns, particularly after more than a decade of under-investment in physical infrastructure, especially in Europe.

Halo businesses include operators of energy grids, pipelines, utilities, transport infrastructure and long-cycle industrial capacity, where replication is constrained by regulation, cost, engineering complexity or time. The valuation gap between capital-intensive and capital-light companies in Europe has narrowed markedly, with the former now trading at higher price-to-earnings ratios. Market performance reflects this rotation. The FTSE 100, weighted towards energy, mining and other traditional sectors, has recorded eight consecutive monthly gains, with February marking its strongest month since November 2022. The pan-European Stoxx 600 index has also reached record highs.

Individual stock performance underscores the shift. Oil tanker operator Frontline has risen 57 per cent this year, while Norway’s Kongsberg Gruppen is up 46 per cent since January. Analysts note that investors are moving away from expensive AI and growth equities towards businesses with tangible infrastructure and long-lived assets, including energy, materials, industrials and shipping.

At the same time, software and data-focused companies have faced pressure as artificial intelligence providers expand into services that threaten existing revenue models. Speculative analysis warning of widespread economic disruption from autonomous AI systems has added to market unease, reinforcing capital flows towards sectors perceived as structurally insulated from rapid technological displacement.