AI disruption is reshuffling PE and VC priorities, and Dakota's coverage of 644,000 private companies shows exactly where the opportunity lies.
For the better part of a decade, software was the undisputed darling of private equity. These companies provided recurring revenue, high margins, and scaled easily. However, the proliferation of AI changed the calculus fast.
A growing number of investors are gravitating toward what the market is calling the HALO trade: Heavy Assets with Low Obsolescence. Leading private capital firms are publicly emphasizing increased focus on manufacturers, industrial component suppliers, and other tangible goods businesses that are far less exposed to AI disruption. Across both public and private markets, interest is concentrated in real, physical assets, medical supplies, energy, real estate, industrials, and related sectors.
This is not a marginal shift. It is a reallocation of attention toward businesses that are harder to disrupt and easier to underwrite in an AI-driven economy.For fundraisers and allocators tracking private markets, this shift has direct implications for where capital flows, which companies attract sponsor attention, and how coverage platforms should be interpreted going forward.
Why Investors Are Turning to Hard Assets
The appeal of the HALO trade goes beyond simply avoiding software risk. Investors are drawn to hard-asset businesses for several interconnected reasons:
- Durability in an AI-disrupted economy: Physical infrastructure, industrial components, and essential supply chains are structurally difficult to automate away. A manufacturer of ship engines or precision conveyor systems has a defensible moat that software cannot easily replicate or displace.
- Stable, underwritable cash flows: Hard-asset businesses, particularly in industrial manufacturing, specialty distribution, and energy infrastructure, tend to generate predictable revenues tied to long-term contracts, replacement cycles, or regulated demand. This makes them attractive for LPs seeking resilience over high-multiple growth.
- Underpenetrated by private capital: Many of the most compelling HALO businesses remain family-owned or founder-led, with no current sponsor relationship. This creates significant white space for GPs building out sourcing pipelines.
- High-conviction value chains. Within the broader HALO theme, several specific industries and value chains are drawing the most attention
- Industrial Manufacturing: precision components, specialty machinery, engineered materials
- Logistics & Distribution: specialty distributors, last-mile infrastructure, cold chain
- Energy Infrastructure: power generation equipment, grid components, energy transition supply chains
- Healthcare Products & Devices: medical supplies, diagnostics equipment, life sciences manufacturing
- Materials & Chemicals: specialty chemicals, advanced materials, packaging
Within each of these areas, GPs are drilling to the sub-industry level, targeting businesses with pricing power, high switching costs, and exposure to secular demand trends that AI cannot compress.
What Dakota's Data Shows
Dakota currently tracks over 644,000 verified private companies globally, spanning both sponsor-backed and privately held businesses across every major sector and geography. Of these, approximately 147,000 are sponsor-backed, while roughly 496,000 remain privately held with no current sponsor relationship.
- 644k Total Verified Private Companies
- 147k Sponsor-Backed Companies
- 496k Non-Sponsor Privately Held
The industry-level breakdown of the non-sponsor universe brings the HALO opportunity into sharp focus. More than 4 in 10 privately held companies in Dakota's database operate in the industrial sector, the vast majority without a current sponsor relationship.
Global Breakdown: Non-Sponsor Private Companies by Industry
|
Industry
|
Companies
|
Share
|
|
Industrial Manufacturing
|
89,000
|
18%
|
|
Specialty Distribution & Logistics
|
67,000
|
13.5%
|
|
Health Care Products & Devices
|
58,000
|
11.7%
|
|
Consumer Products
|
56,000
|
11.3%
|
|
Energy Infrastructure
|
38,000
|
7.7%
|
|
Information Technology
|
36,000
|
7.3%
|
|
Materials & Chemicals
|
29,000
|
5.8%
|
|
Engineered Components & Systems
|
23,000
|
4.6%
|
|
Financial Services
|
21,000
|
4.2%
|
|
Other
|
79,000
|
15.9%
|
The depth here is meaningful. Across industrial manufacturing, specialty distribution, energy infrastructure, and engineered components alone, Dakota tracks well over 200,000 companies that have not yet entered a sponsor relationship, a substantial and largely untapped pipeline for funds pursuing the HALO thesis.
A Global Story With Regional Nuance
The hard-asset theme plays out consistently across Dakota's primary geographic markets, though with meaningful differences in composition and concentration.
North America (355,000+ verified private companies) reflects a more balanced mix, with industrials representing roughly 29% of the non-sponsor universe alongside a comparatively larger technology and healthcare footprint. The breadth of the U.S. industrial base, spanning everything from Midwest precision manufacturers to Gulf Coast energy suppliers, means that sourcing requires sector-specific expertise and local market knowledge to identify the best opportunities within each value chain.
Europe (250,000+ verified private companies) is the clearest expression of the HALO trade globally. Industrials account for over half of all verified private companies on Dakota's platform in the region, a concentration driven by Germany's precision manufacturing base, Scandinavia's energy infrastructure suppliers, and the broader strength of European industrial mid-market businesses. For funds prioritizing resilience and cash flow stability, Europe represents one of the deepest pools of tangible, asset-heavy businesses anywhere in the world.
Across both regions, the pattern is consistent: the businesses most aligned with the HALO thesis are already well represented in Dakota's universe, and most remain privately held, independently operated, and not yet in a sponsor relationship.
What This Means for Investors
The rotation toward hard assets is not just a sourcing story, it is a portfolio construction imperative. As AI continues to compress margins and accelerate disruption across software-driven businesses, investors need confidence that their exposure is anchored in companies with genuine staying power. That means businesses with physical assets, long-cycle demand, and defensible market positions that are not easily replicated by a model or an algorithm.
The sectors most aligned with this shift, Industrials, Energy, Health Care, Materials, and Consumer Staples, represent a deep and largely untapped opportunity set. Dakota's platform gives investors direct visibility into more than 495,000 non-sponsor-backed private companies across these verticals, enabling a level of market intelligence that is difficult to replicate through traditional sourcing alone.
For investors looking to get ahead of this reallocation, the ability to systematically identify, evaluate, and access hard-asset businesses, before they enter a competitive process, will be a defining advantage. The HALO trade is still early. The firms that build the right infrastructure now will be best positioned to capitalize on it.
The shift is already underway. The data to act on it is already here. Book a Dakota Marketplace demo today.
