Global buyout firms including Blackstone, Bain Capital and Brookfield Asset Management are increasingly shifting capital away from software and toward industrial and asset-heavy sectors, according to a report by Bloomberg.
Rapid advances in artificial intelligence have prompted a reassessment of risk and long-term value across private markets, with firms signalling a growing preference for so-called “hard asset” investments – businesses with tangible infrastructure, durable demand and lower exposure to technological disruption. These include sectors such as industrials, energy, real estate and essential services.
The so-called “HALO” trade, reflects investor appetite for more resilient, predictable cashflows in an uncertain environment. Recent deal activity in Europe highlights this shift, with private equity firms competing for industrial and manufacturing assets, including heavy equipment and aerospace suppliers, as well as large-scale infrastructure-related businesses.
At the same time, firms are raising fresh capital to target areas such as industrial technology, data centres and defence – segments seen as both strategically important and less vulnerable to rapid obsolescence. Executives point to supply chain resilience and the potential for AI to enhance, rather than disrupt, manufacturing processes as key drivers of this repositioning.
The rotation comes as the private equity industry reassesses its heavy exposure to software. The sector has attracted more than $1tn of investment in recent years, but new AI-driven tools are beginning to challenge traditional software business models, particularly in the SaaS space. This has raised concerns over valuations and exit prospects for portfolio companies.
A number of planned exits have already been delayed or reconsidered, while some firms are bracing for potential valuation adjustments as part of quarterly portfolio reviews. Industry estimates suggest a significant proportion of buyout assets remain tied to software, increasing sensitivity to any repricing.
The impact is also being felt in private credit markets, where lenders have become more cautious about exposure to software-backed loans. Some financing transactions linked to tech companies have been postponed or restructured amid weaker investor demand. In contrast, debt packages supporting infrastructure and industrial deals have continued to attract strong interest.
Despite the shift, market participants stress that software will remain a core focus for private capital. However, investors are becoming more selective, particularly as they reassess how to value businesses in a rapidly evolving AI landscape.
