Private Equity’s Next Big Bet: AES, SB Energy — and the Rise of HALO Assets

Private equity investors are shifting their focus away from traditional software deals and toward infrastructure-focused investments as artificial intelligence reshapes the market.

PitchBook says the next opportunity for private equity may come from what it calls HALO assets — "heavy asset, low obsolescence" companies with durable demand drivers and lower risk of technological disruption.

The shift comes as private equity enters another uncertain period.

PitchBook analysts described 2026 as "another false start" for the industry, with early optimism disrupted by macroeconomic shocks, higher interest rates and growing concerns around AI’s impact on existing business models.

"While momentum has been halted, and optimism has started to fade, we do see pockets of strength as the industry begins to rotate and grapple with the new realities," Steven Buibish, director of U.S. private equity research at Pitchbook said during the midyear outlook webinar.

Analysts reviewed more than 100,000 transactions and created a HALO category to identify companies with physical assets, long-term demand trends and lower exposure to technological disruption. The firm pointed to companies such as AES Corporation and SB Energy as examples of the broader investment theme.

AI Disruption Challenges Software’s PE Dominance

For years, software was one of private equity’s favorite sectors.

Firms could buy companies with recurring revenue, improve operations and sell them later at higher valuations. But that strategy is facing new questions as artificial intelligence advances faster than many investors expected.

Software investment reached a peak in the third quarter of 2025 before falling to a new low in the second quarter of 2026, according to PitchBook data. The concern is that AI could disrupt the economics of existing software companies and challenge their long-term valuations.

"There’s a lot of concern that the economics of the existing software companies may not have a terminal value, because they may be disrupted," said Garret Hinds, senior research analyst at Pitchbook.

Private credit investors have also pulled back from financing software deals as uncertainty around AI has made lenders more cautious. That shift has made it harder for private equity firms to finance larger acquisitions, even as some software companies continue to post solid operating results.

When asked what private equity’s “new favorite” sector could be, Hinds pointed to energy.

“The irony is probably going to be related to the AI disruption, and it’s probably going to be connected to energy. All the new demand we have for electricity is related to the AI buildout and then also the physical infrastructure,” he said.

Hinds argued that investors’ caution has become disconnected from the underlying performance of many software businesses, with fears about AI’s long-term impact outweighing current fundamentals.

“Sentiment is deteriorating significantly, and more than the fundamentals really suggest,” he said.

As investors reassess software, energy has emerged as one of the biggest areas of interest. During the webinar, 51% of respondents selected energy as the sector offering the most upside over the next six months. The appeal is tied to the growing electricity needs created by artificial intelligence, particularly as data centers require more power capacity.

Private Equity’s Exit Problem Grows

The shift toward new investment themes comes as private equity firms continue to face a growing exit backlog. The strategy has become increasingly popular as traditional exit routes, including IPOs and M&A, remain difficult.

"Without timely exits, distributions back to LPs are limited. This means that LP capital will be constrained to commit into new funds," said Jinny Choi, senior research analyst.

Continuation funds have emerged as one solution, allowing firms to provide liquidity while holding assets longer. 

"I think a lot of investors could be concerned about the rationale behind putting assets into a continuation fund, but this may be just kicking the can down the road versus having a true runway for additional value creation," Choi said.

As private equity moves through a reset, PitchBook’s outlook suggests firms will need to find new sources of returns. Increasingly, investors are betting those opportunities may come from the physical infrastructure powering the AI economy rather than the software companies that defined the last decade.

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