Investors are finally starting to value traditional "capital-intensive" businesses, not just because of data centers.

Investors’ repricing of “Old World” capital-intensive assets is spreading from data centers to the broader physical economy supply chain.

WallstreetCN reported that on February 24, Goldman Sachs released a research note saying that in the era of AI, capital is moving toward “heavy asset, low obsolescence” (HALO) physical assets, such as power grids, pipelines, utilities, transportation infrastructure, and critical industrial capacity. These assets are hard to replicate, have strong physical barriers, and are not easily outdated.

(Since late February, the HALO basket of stocks has continued to rise.)

At the same time, changes in US tariff policy are providing additional support for deals in physical assets. Goldman Sachs preliminarily projects that tariff adjustments triggered by the Supreme Court ruling will lower the actual US tariff rate by about 100 basis points.

Although uncertainty remains regarding tariff policy, the easing of costs for infrastructure and industrial companies reliant on physical imports will further reinforce the short-term logic of the market’s tilt toward physical assets.

Recently, Goldman Sachs strategist Chris Hussey emphasized that investors are assigning higher valuations to traditional capital-intensive companies, and this trend is extending up and down the supply chain and to broader segments of the economy.

Goldman's Oppenheimer explained that for the first time since the commercialization of the internet about a quarter of a century ago, the prospects for technological growth are becoming highly dependent on physical assets such as data centers and energy supply.

Revaluing Physical Assets, From Data Centers to the Whole Infrastructure Chain

Goldman Sachs believes the logic behind this round of revaluation of capital-intensive enterprises is: in a gold rush, the most stable beneficiaries are often the makers of shovels.

Goldman Sachs’ Oppenheimer points out that technological growth in the AI era increasingly relies on visible, tangible physical assets, as opposed to the pure software and platform models that have dominated the market over the past twenty-five years. This view prompts a revaluation of the strategic value of “hard assets.”

Goldman Sachs defines companies with the following two characteristics as the highest quality “HALO” targets.

First, high asset reconstruction cost, deep regulatory barriers, long construction cycles—difficult to easily disrupt or replace; second, possessing long-term economic value. The specific focus areas include:

Power gridPipelinesUtilitiesTransportation infrastructureCritical machinery and equipmentLong-cycle industrial capacity

Soft Assets Under Pressure, AI Disruption Concerns Spark Valuation Reshuffling

The flip side of the pursuit of physical assets is the ongoing pressure on soft assets.

Software, media, consulting, and certain financial sub-sectors are being re-examined by the market. In February of this year, software and IT service stocks plunged again, with shares of INTU, WDAY, IBM, and ACN all dropping more than 20% in a single month.

The market worries that AI will “disintermediate” these companies or open doors to low-cost competitors, fundamentally undermining their business models.

However, Goldman Sachs analyst Gabriela Borges emphasizes that not all software companies operate under the same business model. She points out that agentic technology ecosystems are rapidly evolving, making it highly challenging to evaluate ultimate value and set valuation floors, so this does not mean all software stocks should be sold off.

Goldman Sachs believes investors can still focus on companies that can prove their historical expertise leads to higher quality AI outcomes, and maintain profitability or improve fundamentals in the coming AI era.

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