Investors are still collectively freaking out about how

artificial intelligence

(AI) might take down entire industries, but they should know about an investment concept called HALO — heavy assets, low obsolescence — stocks gaining traction.

HALO is a stock-picking framework recently popularized by Josh Brown, chief executive of Ritholtz Wealth Management LLC and a CNBC contributor. In response to the massive decline in software stocks so far in 2026, he was seeking stocks that should be the most resilient to AI disruption, while potentially even benefiting from AI tech advances.

HALO stocks might still face traditional risks, such as economic cycles, but should be able to avoid technology replacement threats. At the very least, these stocks should let investors breathe a little easier, knowing that the robots are not going to replace

all

their current companies in their stock portfolios. Let’s drill further into some sector analysis.

Metals and stuff

We once had a boss who liked to tell us to “look for things that would hurt if you dropped them on your foot.” It was his funny way of saying look for some hard assets, or companies that produce metals or stuff such as steel.

No matter how AI technology develops, things are still going to have to be built, and nickel, iron ore, lumber, steel and gold bars are not going to be replaced by an agentic AI bot.

Canada is fortunate to have vast metal resources. Sure, this sector remains mired in confusion about tariffs, but our bet is that AI is going to be around a lot longer than tariffs will be. Now, unfortunately, AI might not result in huge savings for mining and other companies in production industries, but it should be able to help in some small way.

Energy and midstream infrastructure

Sure, the green crowd might object, but energy in the form of carbon is not going away anytime soon. Oil and gas pipelines, gas processing plants, storage facilities, refineries and actual energy production (oil and gas extraction) are not going to be replaced by AI.

The stocks of companies such as

Enbridge Inc.

hit all-time highs this week. The S&P/TSX energy sector, the one everyone hates, is already up about 15 per cent this year. The infrastructure sector is the epitome of hard assets, with a large oil refinery costing upwards of $10 billion. Suncor Energy Inc.,

Keyera Corp.

and Pembina Pipeline Corp. are other examples of companies that slot into this category.

Defence and aerospace

AI is likely going to play a big role in future wars, but despite technological advances, countries are still going to need to defend themselves with ships, aircraft carriers, planes, tanks and armoured personnel carriers. This sector also has the benefit of nearly every country boosting their defence spending budgets in response to a changing world order.

Companies such as RTX Corp., CAE Inc.,

Lockheed Martin Corp.

and Northrop Grumman Corp. could continue to benefit or, at the very least, face less obsolescence due to AI threats.

There is also going to be huge capital allocated to space as humans expand their reach. Companies such as MDA Space Ltd., Telesat Corp., Rocket Lab Space Systems Inc. and Firefly Aerospace Inc. might be ones to watch along this theme.

Utilities and power infrastructure

Electrical utilities might be the sector that is the least likely to be negatively impacted by AI developments. AI will not replace electricity needs (low obsolescence) and utility infrastructure assets such as giant hydroelectric power dams might just be the definition of heavy assets.

Then, of course, everyone has heard about how AI and data centres are going to cause a surge in demand for power over the next five years.

Companies such as Fortis Inc. hit all-time highs this week. Stocks of companies such as Brookfield Renewable Partners LP are doing well, up 46 per cent in the past year. Brookfield in 2024 also signed a US$10-billion data centre power contract with

Microsoft Corp.

Transportation and capital goods

The transportation sector took a giant hit last week on news that a tiny company called Algorhythm Holdings Inc. used AI to increase its customers’ freight volumes without a corresponding increase in operational headcount. The news knocked about US$200 billion in value off the sector.

Don’t get us started on how Algorhythm is only a US$15-million company with 25 employees and used to sell karaoke machines until last August. Stocks of stalwart companies such as CH Robinson Worldwide Inc. declined as much as 24 per cent on this so-called news.

But we do not think the transportation sector is dead yet. Even with big advancements in AI, stuff is still going to be needed to be shipped from place to place. Companies such as Canadian National Railway Co.,

Canadian Pacific Kansas City Ltd.

and TFI International Inc. can still survive in an AI world.

  • With investors on edge about AI effects, which stocks are vulnerable or could benefit?
  • With small-cap stocks finally outperforming, here are the ‘five Ps’ to watch out for

Engineering and construction companies like WSP Global Inc. and Stantec Inc. have large contract backlogs to build things (including energy infrastructure projects) and will likely be able to adapt and have low obsolescence.

Peter Hodson, CFA, is founder of 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals. He is also portfolio manager for the i2i Long/Short U.S. Equity Fund. (5i Research staff do not own Canadian stocks. i2i Long/Short Fund may own non-Canadian stocks mentioned.)

_____________________________________________________________

If you like this story,
sign up for
the FP Investor Newsletter.

_____________________________________________________________