The market’s deep dependence on the artificial intelligence (AI) trade has spawned a nifty new acronym: Heavy Asset, Low Obsolescence (HALO). In simple terms, HALO refers to shares of companies that even AI is unlikely to ever render obsolete.

HALO isn’t just a memorable acronym. It’s an investment “lifestyle” to consider, particularly at a time when even Goldman Sachs cautions that the market is becoming one big AI trade. These days, it can be difficult to find corners of the equity market that aren’t, at a minimum, backdoor AI trades. Even the utilities sector has credible AI gravitas.

Some defensive groups do stand out as AI “buffer” plays, consumer staples, healthcare and real estate among them. And give it up for staples because the Consumer Staples Select Sector SPDR (XLP) is higher by nearly 11% this year. It’s real estate counterpart is up almost 9% -- two performances confirming there is some appetite among investors to diversify away from AI.

Good news for advisors and clients: thanks to the always intrepid ETF industry, HALO convenience can be had in a single package.

Is it Worth Loving LAHO?

Meet the Roundhill HALO ETF (LAHO), which presumably would be using the ticker “HALO” if it wasn’t already spoken for. The ETF, which tracks the Akros U.S. Heavy Assets Low Obsolescence (HALO) Index, came to market last week.

Home to 100 stocks, LAHO’s investment objective is as one would expect: present investors with an efficient vehicle for tapping into a somewhat broad basket of companies that are unlikely to be disrupted by AI.

“What makes these companies potentially resistant to AI disruption is the nature of their value. AI can analyze, predict, and optimize, but it cannot lay a pipe, install a billboard, or replace the physical infrastructure that modern life depends on,” notes Roundhill’s Thomas DiFazio. “In some cases, they may even benefit from AI through automation, predictive maintenance, and operational efficiency. Many of these businesses also operate behind structural moats: regulatory protections, multi-decade customer relationships, and specialized manufacturing knowledge. None of those become cheaper or more replicable when a large language model improves.”

None of the new ETF’s holdings command more than 1.37% of its portfolio, essentially making this an equal-weight strategy and it is one that does an admirable job of delivering on the HALO promise. Admittedly, I picked these holdings at random, but it’s not a stretch to say that railroad operators, tobacco companies, waste haulers and Ferrari (RACE) offer investors consider diversification away from AI and protection against that technology. It’s almost as LAHO is the anti-SaaSpocalypse ETF.

Looking Into LAHO

As highlighted in the chart below, LAHO is heavy on industrial stocks and that sector has plenty of AI intersections, but this ETF largely avoids the industrials stocks – think Caterpillar (CAT) and Deere (DE), among others – with deep AI ties.

(Image: Roundhill Investments)

“The most striking exposure is the smallest. Information Technology represents a minimal share of LOHA. By comparison, Technology represents roughly 30% of the S&P 500,” adds DiFazio. “Just as notable is what is missing. There is no Magnificent Seven. There are no hyperscalers. There is no AI mega-cap. LOHA is the part of the U.S. equity market that the AI narrative has, so far, ignored.”

The new ETF’s expense ratio is 0.35%.

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