"Anything but AI" is giving rise to the "Halo trade"
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The anything but AI trade is catching on, as investors hunt for companies unlikely to be wiped out by an Anthropic plug-in or ChatGPT — think real things like airplanes or beer or energy.
Why it matters: It's a counter to the AI scare trade, which has been on a bender this year, steamrolling entire industries based on the flimsiest of evidence that the technology is coming for them.
Catch up quick: Software is Exhibit A, with the S&P Software Index down about 20% this month alone.
- But similar freak-outs have happened to real estate, IT, cybersecurity and insurance. On Monday, IBM got hit, down 13% after Anthropic spelled out how Claude can modernize legacy code.
- DoorDash, the food delivery company, fell 6.6% because of its appearance in a viral "thought exercise" that laid out a doomsday AI scenario.
Where it stands: Enter Halo — "heavy assets, low obsolescence." Coined this month by Josh Brown, CEO of Ritholtz Wealth Management, Halo describes stocks of businesses that are more AI proof.
How it works: Investors are used to looking at the market through old paradigms: growth versus value or defensive versus cyclical.
- "That's not what's going on now," Brown tells Axios. "Throw all that out."
- The new metric: disruptable or not?
Follow the money: His go-to example is Delta Air Lines versus Expedia.
- Until this year their two stocks were linked to the overall travel sector. Now they've decoupled. (See chart.)
- In danger of being replaced by a good AI chatbot, Expedia is down 6% from last year, and Delta is up 8.3%.
Zoom in: There's also the practice of digging stuff out of the ground. The S&P Global Mining Index is up over 100% from last year.
- Budweiser stock — left for dead after its "woke" dustup — is up 48% from last year. You can't drink generative intelligence.
Reality check: It's a crude metric. Of course, each Halo stock has a more specific story to tell.
Zoom out: Investment banks are on board. Goldman Sachs just launched a new index, SPXXAI, which lets you invest in the S&P 500 benchmark minus all things AI, Axios' Madison Mills reported last week.
The big picture: For the past 15 years, investors have been happy to throw money at stocks with "asset-light" business models — software companies without a lot of labor or infrastructure that reliably brought in a steady stream of recurring revenue through subscriptions.
- "We reached a point where people were saying, 'what else would I want to invest in?'" Brown says.
- That has totally flipped on its head. "That era just came to an end."
Between the lines: Winners and losers will certainly emerge from the carnage, but at the moment, it's hard to see who's who.
- Some of the stocks getting battered right now are probably absurdly cheap. Others are never coming back.
- "We don't yet know which is which or what the timetable might be," Brown wrote earlier this month.
Flashback: It's like when the dot-com bubble burst and investors sprinted away from tech stocks. Back then you couldn't tell which one was Pets.com and which one was Amazon.
What to watch: There's no end in sight for the scare trade. There's no clear moment when we'll know if a company is AI-proof or not.
- As Brown and others are saying now, "you can't prove a negative."
