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 per cent of the Toronto stock market’s weighting versus 16 per cent 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 per cent in 2025, while the S&P 500 added 16 per cent.
“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 per cent, with most of that rise happening before the start of the U.S.-Israel war on Iran on Feb. 28. Foreign investors are taking note – the latest data from Statistics Canada shows foreign investment in Canadian equities rising to $17.2-billion in the final three months of 2025, up 132 per cent from $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 US$7-trillion over the next decade, spanning everything from hyperscalers’ data centres to the power grids that feed them.
The TSX has not completely escaped the sell-off in software stocks, with prominent names such as e-commerce company Shopify Inc. and Thomson Reuters Corp., 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 $280-billion in the next five years on infrastructure, defence 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, 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.