Market narratives surrounding artificial intelligence have shifted from "AI Bubble" to "AI Disruption" and "HALO," indicating a transition from "systematic bubble pricing" to "structural differentiation pricing." Investors are now reassessing which sectors will benefit from resource constraints, which will face substitution risks, and which possess survival certainty. This evolution has moved markets from a highly concentrated state to a phase of differentiation among Winners, Survivors, and Losers—a structural change evident both within U.S. equities and across international assets. We believe HALO essentially represents a one-time survival premium revaluation for assets with low substitution risk, positioning them as Survivors. However, HALO does not equate to structural winners. Defensive allocations based solely on survival certainty are unlikely to form a long-term investment theme and are more reflective of periodic style rotations.
Concerns about an "AI Bubble" have eased, leading to a temporary decline in systematic valuation risks. The core narrative in U.S. equity markets has transitioned from "AI Bubble" to "AI Disruption" and "HALO," reflecting recognition of AI's sustained development potential. The reduction in "AI Bubble" worries, combined with strong earnings performance from U.S. AI companies, has provided fundamental support for this narrative shift, moving the market from "systematic bubble pricing" to "structural differentiation pricing."
Market phases are changing, resulting in a structural differentiation among Winners, Survivors, and Losers. The initial phase of AI narrative was driven by computing power expansion and AI capital expenditure, characterized by a highly concentrated structure led by U.S. mega-cap stocks. Entering 2026, the market began reassessing beneficiaries of resource bottlenecks, sectors vulnerable to substitution, and entities with survival certainty. This shift has moved the market from high concentration to a phase of differentiation among Winners, Survivors, and Losers—a structural change visible both within U.S. equities and across national assets.
Within U.S. equities, entering 2026 and prior to the U.S.-Iran conflict, AI infrastructure, energy and power, semiconductor equipment, and related physical assets temporarily strengthened, emerging as Winners. Meanwhile, software assets with higher substitution risks faced performance pressure, becoming Losers. Beyond AI-related Winners, a broader category of "heavy-asset, low-elimination" assets began attracting capital attention—the so-called "HALO"—positioning them as Survivors.
At the international level, entering 2026 and before the U.S.-Iran conflict, South Korean equities significantly outperformed other major markets driven by explosive demand for memory chips, establishing them as Winners. European markets were viewed as temporary Survivors (HALO) due to their industry structure. The Indian market, characterized by high labor-intensive services and outsourcing attributes, recently showed relative underperformance, becoming a temporary Loser.
HALO essentially represents a defensive survival premium rather than a structural growth theme. The emergence of HALO follows a clear chronological pattern, with its logic established after Losers have been priced. Therefore, HALO fundamentally constitutes a one-time survival premium revaluation for low-substitution-risk assets. HALO does not equate to structural winners. Defensive configurations based purely on survival certainty are unlikely to form a sustainable investment theme. Assets with genuine potential for sustained excess returns should be positioned at critical nodes along the AI expansion path, deeply integrated with resource constraints or technological upgrade directions, and characterized by earnings elasticity. Consequently, we view HALO trading more as an expression of periodic style rotation rather than a new long-term growth paradigm. HALO warrants attention when AI lacks clear new directions; however, once AI expansion directions become evident, capital will likely return to high-growth opportunities.
Risk factors include collective earnings deceleration among leading U.S. AI companies or systematic disproval of capital expenditure returns; inflation exceeding expectations with unexpectedly hawkish Federal Reserve policies; and unforeseen geopolitical developments leading to significant decline in market risk appetite.
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