* TSX benefits from shift to HALO stocks amid AI

disruption

* Energy sector adds 28% since the start of the year

* Foreign investment in Canadian equities rises in recent

months

* Canadian fiscal policy supports HALO stocks with major

investments

By Fergal Smith

TORONTO, March 12 (Reuters) - Investors are turning to

Canada's resource-rich stock market for shelter from the turmoil

around artificial intelligence - and on hopes the new technology

will ultimately boost productivity for some of its biggest

names.

Shares of software and other companies with business models

considered vulnerable to replacement by AI have been selling off

for months, dragging down major indexes like the S&P 500, the

U.S. benchmark. But the TSX is packed with the type of

capital-intensive, economically important companies that

analysts say could evade disruption.

These so-called 'HALO' stocks, or companies with heavy

assets and low obsolescence, include energy producers, metal

miners, industrials and utilities. Together, they account for

51% of the Toronto stock market's weighting versus 16% for the

S&P 500.

The recent move into HALO stocks could help the TSX sustain

recent outperformance compared to Wall Street. The Toronto

market was up 28% in 2025, while the S&P 500 added 16%.

"It's fantastic for the TSX," said Greg Taylor, chief

investment officer at PenderFund Capital Management, which has

cut back on some technology stocks and added stocks that are

tied to physical assets like commodities.

"The knock on the TSX forever has been that we don't have

enough tech companies and we're way more focused on value and

resources and heavy industries. And that now is what everyone

wants to buy," Taylor said.

Energy, materials, industrials and utilities have been the

top performing sectors on the TSX year-to-date. Energy has added

28%, with most of that rise happening before the start of the

U.S.-Israel war on Iran on February 28.

Foreign investors are taking note - the latest data from

Statistics Canada shows foreign investment in Canadian equities

rising to C$17.2 billion ($12.7 billion) in the final three

months of 2025, up 132% from C$7.4 billion in the previous

quarter.

Protection against AI disruption "fits exactly with the

theme of materials and energy - two sectors within the TSX that

for a long time we've been leaning into and have been investing

in heavily," said Victor Kuntzevitsky, a portfolio manager at

Stonehaven, Wellington-Altus Private Counsel. "Energy and

materials require a lot of capital expenditure to take out the

assets from the ground."

Those sectors could also benefit from the immense energy

required to power AI, Kuntzevitsky said.

BENEFITING FROM FISCAL POLICY

Global investment in AI infrastructure is expected to exceed

$7 trillion over ‌the next decade, spanning everything from

hyperscalers' data centers to the power grids that feed them.

The TSX has not completely escaped the selloff in software

stocks, with prominent names such as e-commerce company Shopify

Inc ( SHOP ) and Thomson Reuters Corp ( TMSOF ), a global

content and technology company, down sharply from their peaks

last year.

HALO stocks are well positioned to benefit from the Liberal

government's fiscal policy, say analysts. Canadian Prime

Minister Mark Carney has committed to investing over C$280

billion in the next five years on infrastructure, defense and

housing as well as measures to enhance productivity.

Productivity broadly also stands to get a lift as AI starts to

show efficiencies in non-tech companies.

"The more optimistic you are on artificial intelligence, the

more you should move outside of the builders of the technology

and into some of the companies that could benefit from

productivity increases," said Ashish Dewan, senior investment

strategist at Vanguard.

"Canada has strong exposure to value stocks and these value

stocks are the ones that are going to benefit longer-term."

Value stocks include HALO stocks as well as financials, such

as Royal Bank of Canada ( RY ), which has the highest market

capitalization of any stock on the TSX.

Major companies on the TSX have not participated in the

investment phase of the AI boom - a phase dominated by U.S.

technology companies - but that may become less of a drawback

over time, said Dewan.

"We just think that new entrants will come in, erode the

profit margins of existing winners and that really helps

Canada," Dewan said.

($1 = 1.3555 Canadian dollars)