Goldman Sachs has stark message for investors in AI stocks

Core Insights - Wall Street is distinguishing between stocks benefiting from artificial intelligence and those negatively impacted by it, with Goldman Sachs providing a framework for investors to navigate this shift [1][3] Group 1: Market Dynamics - A rotation is occurring in February 2026, favoring asset-heavy companies with factories and specialized equipment, while software companies tied to labor-intensive workflows are experiencing a sell-off [2] - The disruption caused by artificial intelligence is no longer a question of if, but rather which stocks will benefit or suffer from it [3] Group 2: Metrics for AI Disruption Risk - Goldman Sachs employs two metrics to assess AI disruption risk: labor cost as a share of revenue and physical asset density [4] - The first metric estimates exposure to AI automation by analyzing job functions and labor-cost-to-revenue ratios, identifying sectors like software and media as most at risk [4] - The second metric highlights businesses with physical assets, which are harder to replicate and less vulnerable to automation, distinguishing durable businesses from those at risk [5] Group 3: The HALO Effect - The "HALO effect" refers to the outperformance of capital-intensive stocks over capital-light stocks, with a reported 35% advantage since the start of 2025 [6] - Examples of HALO businesses include grids, pipelines, utilities, transport infrastructure, and critical machinery [7] - Markets are rewarding companies with capacity and infrastructure that are costly to replicate, leading to significant inflows into utilities, basic resources, and energy sectors [8]