From Digital Abundance to Physical Constraint

Positioning for the HALO Environment

For more than a decade, markets rewarded businesses that could scale without building much of anything. That era may be shifting. As artificial intelligence and digital demand accelerate, they are running into real-world limits in power, infrastructure, and materials. When growth meets physical constraint, value shifts to the systems that enable it. This environment aligns with what institutional research describes as the HALO framework, (Heavy Assets, Low Obsolescence), where durable infrastructure and scarce physical capacity regain importance. If the last cycle was defined by digital expansion, the next may be shaped by the assets that make that expansion possible.

The Digital Economy Still Depends on the Real World

Artificial intelligence feels weightless. You type a prompt and get an answer instantly.

But behind that experience sits a heavy physical system:

• Data centers
• Electricity and transmission networks
• Cooling infrastructure
• Industrial materials and manufacturing capacity

AI is not just software. It runs on power, metals, and materials.

A simple way to understand this:

The digital economy is like a high-performance car.Software is the engine. Infrastructure is the fuel.No fuel, no movement.

As digital demand accelerates, the strength of the physical system becomes the constraint.

Global electricity demand from data centers is expected to roughly double by 2030 [IEA, 2025]. The scale of the required infrastructure is extraordinary.

The projected power demand from AI and data center expansion is comparable to building the equivalent of 20 new U.S. cities with populations of one million people. For context, there are currently only about 11 cities in the United States of that size.

These facilities require dense, continuous, high-reliability power. The direction is clear. Growth is becoming more resource intensive.

Why Physical Capacity Is Becoming Valuable Again

For years, investment flowed toward scalable digital platforms while physical infrastructure saw limited expansion.

Energy systems, grid capacity, and strategic materials experienced prolonged underinvestment while demand accelerated through electrification and cloud computing.

This created a simple imbalance.

When demand rises faster than supply can respond, scarcity develops. Scarcity increases the value of existing capacity.

Economic history shows that periods of underinvestment often restore pricing power to physical assets.

This is the environment described by HALO. Heavy assets with long lives, high replacement costs, and limited supply become more valuable when the system is under pressure.

We see this emerging across:

• Power and grid infrastructure as electricity demand rises
• Strategic materials required for electrification and data centers [S&P Global, 2026]
• Industrial capacity as supply chains become more resilient

What This Means for Investors

This shift is both an opportunity and a risk consideration.

Many portfolios remain heavily concentrated in long-duration growth and narrow market leadership. A more capital-intensive environment may reward broader exposure.

We believe resilient portfolios may benefit from balancing innovation with the physical systems that support it, including infrastructure, real assets, and durable businesses with stable cash flow.

Put simply:

Do not just invest in the technology. Invest in what makes the technology possible.

The Bottom Line

Digital growth depends on real infrastructure.

As demand rises, scarce capacity gains value.

We believe this shift is already underway. Portfolios should reflect it.

‍