Private capital is undergoing a major strategic pivot as the rise of artificial intelligence forces investors to reassess risk, durability, and long-term value. After years of heavy exposure to software, firms are now shifting toward tangible, asset-heavy industries—marking the emergence of what is being called the “HALO” trade.

The Rise of the HALO Trade

Leading firms such as Blackstone, Bain Capital, and Brookfield Asset Management are reallocating capital toward industries with “low obsolescence risk.” These include sectors like manufacturing, logistics, energy, and industrial equipment—areas less likely to be disrupted by AI.

This strategy, known as HALO (high-quality, asset-heavy opportunities), reflects a growing preference for stability and predictability. Investors are increasingly drawn to businesses that generate consistent cash flows and are grounded in physical infrastructure rather than digital platforms.

AI Is Forcing a Rethink of Software Bets

For over a decade, software dominated private equity portfolios due to its scalability and recurring revenue models. However, the rapid advancement of AI—particularly from players like Anthropic—is now threatening many traditional SaaS business models.

This has triggered concerns about overexposure. Around 40% of buyout assets are still tied to software, and firms are beginning to face challenges in exiting investments or maintaining valuations. Some deals have stalled, IPOs have been postponed, and lenders are becoming more cautious.

The uncertainty lies in how AI will reshape customer demand and pricing power, making it difficult to determine long-term value for many software companies.

Industrial Assets Gain Strategic Importance

At the same time, industrial sectors are gaining renewed attention. Investors see two major drivers behind this shift:

First, supply chain resilience has become a priority following pandemic-era disruptions. Second, AI is expected to enhance—not replace—industrial production, making these businesses more valuable over time.

As a result, private equity firms are competing for assets such as heavy engine units, aerospace suppliers, and infrastructure companies, while also raising new funds focused on industrial technology and defense.

Credit Markets Reflect the Shift

The rotation is also visible in credit markets. Loans tied to industrial and infrastructure deals are seeing strong demand, while financing for software-related transactions is facing increasing resistance.

This divergence highlights a broader market sentiment: investors are prioritizing tangible assets with predictable cash flows over high-growth but uncertain digital businesses.

Not the End of Software—But a Reset

Despite the shift, software is not being abandoned. Deals are still happening, and the sector remains important. However, investors are becoming far more selective, focusing on companies that can integrate AI effectively rather than be disrupted by it.

This marks a transition from a broad, growth-driven approach to a more disciplined, value-oriented strategy.

Forward Outlook: Stability Over Disruption

The move toward hard assets signals a deeper تحول in private capital. In an environment shaped by AI disruption and macro uncertainty, investors are increasingly favoring durability over hype.

If this trend continues, capital flows may increasingly favor industries rooted in the physical economy—reshaping not just private equity portfolios, but the broader investment landscape in the AI era.