Artificial intelligence (AI) is beginning to disrupt the economy -- and the stock market -- in a major way. There was a major sell-off in the market, and in tech stocks in particular, on Monday, Feb. 23, due to growing anxieties about the potential damage AI could do to individual companies and industries, and -- perhaps more concerning -- to the economy more broadly.
AI start-up Anthropic announced that its Claude Code tool could modernize COBOL coding language, which is a major asset of International Business Machines. That sent shares of IBM down 13% on the day, its worst single-day loss since 2000.
In addition, over the previous weekend Citrini Research issued a note about a possible scenario -- two years from now -- when AI's displacement of jobs has sent the unemployment rate above 10% and aggregate demand in the economy has begun to plummet.
If, like me, you read a lot of investing and macroeconomic commentary, you know the Citrini report was seemingly all anyone was writing about early in the week. The authors emphasized that what they described was a scenario, not a prediction, but it spooked markets nonetheless and the S&P 500 index fell 1% on the day.
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Investors are seeking stocks not vulnerable to AI
As a result of growing concerns about the impact of AI, some investors have begun to seek out so-called HALO stocks. HALO stands for "heavy assets, low obsolescence," and it is a group of stocks deemed to be less vulnerable to disruption by AI. In fact, some of these companies may become more profitable thanks to AI.
So, what kinds of stocks are deemed to be HALO? Well, they range widely. Think of companies that can't immediately be replaced or diminished by AI, and you're thinking HALO stocks. Financial commentator and writer Josh Brown, who coined the acronym, says HALO companies are those that are "undisruptable companies from an AI standpoint."
He points to ExxonMobil (XOM +1.74%) as a great example, in addition to energy stocks more broadly. They have significant heavy assets that AI cannot replace or replicate, and they may even benefit from efficiencies AI can offer.
NYSE: XOM
Key Data Points
Some other potential HALO stocks mentioned in the media include fast food giant McDonald's (MCD +0.31%), delivery firm FedEx (FDX 1.01%), beverage behemoth Coca-Cola (KO +0.28%), construction and agriculture equipment makers Caterpillar (CAT 0.76%) and Deere (DE 1.17%). Those five stocks are among the best performers in the S&P 500 this year, while IBM is down 20% year to date, and stocks of software makers are plunging.
Of course, there are many more such companies that could be characterized as less vulnerable to displacement or obsolescence as a result of AI. They may be worth a look.
