"Halo Plus Industrial AI" double protection, the moat of the old industrial giant Siemens is becoming increasingly strong

German industrial super giant Siemens AG believes that the threat of artificial intelligence to its software business is far smaller than that of its peers, mainly because the core industrial processes covered by its product line must meet extremely high standards, making it very difficult to achieve these standards. The company also stated that the incredibly strong demand in the industrial sector ensures that its business has no possibility of being completely "overturned" by AI. With the "HALO" halo above its head, Siemens is confident in its future performance growth and is not afraid of the threat posed by AI, highlighting the pessimistic narrative of the HALO investment theme in the face of "AI overturning everything", as well as the continued attractiveness of being at the forefront under the disturbance of the new round of geopolitical conflicts in the Middle East. According to Cedrik Neike, head of Siemens Digital Industries, Siemens' industrial software and AI-related products, which are purchased by large buyers such as automakers or pharmaceutical giants, leave no room for error in the products they produce, ensuring long-term demand for Siemens products. Siemens' digital industry division is one of the world's largest automation business units, covering machine control and factory simulation and modeling software used to create digital twins. Neike stated in an interview, "AI can and will change everything - some changes will happen very quickly, while others will take longer." He emphasized that factory software that must meet quality and reliability certification requirements will continue to support strong demand for its high-end product line, citing Siemens' exclusive chip design EDA software as an example. He emphasized, "If your deviation is just an incredibly tiny 2 nanometers - much finer than the width of a human hair - you may end up having to scrap a large number of high-performance chips." It is worth noting that Siemens is one of the world's three largest chip design software (EDA software) manufacturers, and Mentor Graphics, one of the three global EDA giants along with Synopsys and Cadence, was officially acquired by Siemens in 2016 and integrated into Siemens Digital Industries. In 2021, it was officially renamed Siemens EDA. According to top analysts including UBS, Siemens not only benefits from the catalytic effect of resisting the AI disruption brought by the "HALO" halo, but will also benefit from the strong structural growth driven by the emerging industrial "AI+" software product line, which is why the market values it not only as a defensive valuation, but also as a double premium of "resistance to AI disruption + potential AI-driven growth trajectory". Siemens is not afraid of the disruptive effects of AI With the recent launch of a series of AI agents focused on highly efficient agent-based workflows by AI leaders such as Anthropic and OpenAI, these AI agents have the potential to replace certain functional software services at a much lower cost, causing a heavy sell-off in global software stocks. The iShares Expanded Tech-Software industry ETF (code: IGV), which tracks the US software industry, has fallen by about 30% from its historical high in September, plunging into a deep bear market zone. The pessimistic tone of the "AI disrupts everything" since February is mainly due to the market's increasing concern that AI agents such as Claude Cowork and OpenClaw (formerly known as Clawdbot, Moltbot) may weaken the entire software empire based on the SaaS seat subscription revenue model, leading to a rare sell-off. This sell-off has quickly spread to industries such as insurance, real estate, trucking, and any other industries that appear to have a seat revenue model or labor-intensive business model - the market believes that these industries will be completely overturned by AI. Not only the US stock market, but also the software sector of the global stock market has been continuously hit hard by the panic of "AI disrupting everything" since February. Although the buyback scale of the US software sector has surged, investors are not buying it, as the market is truly concerned about whether the long-term fundamentals and business models will be completely reshaped by AI intelligent entities such as Claude Cowork and OpenClaw. This German industrial super giant has diversified large manufacturing clients such as Heineken, TSMC, Johnson & Johnson, and Toyota, and has continuously strengthened its software business through large acquisitions in recent years. This has made the company vulnerable to the widespread concern about how AI will disrupt business models. SAP SE, Europe's largest software company based in Germany, has evaporated about a quarter of its market value since the beginning of the year. In contrast, Siemens has fallen by about 10%, and most of its losses since February have been recovered. As shown in the figure above, the impact of the "SaaS software doomsday theory" on the stock price of the German software giant SAP is far greater than on Siemens. Both companies have experienced short-term severe sell-offs due to market concerns about the disruptive effects of AI. However, whether it is the management of Siemens or the investors who have long focused on Siemens, they do not fear the so-called pessimistic narrative of "AI disrupting everything". Neike, head of Siemens Digital Industries, conveys the strong demand in the industrial field that protects it from being overturned by AI, attracting investors to the "HALO theme". Siemens is an attractive target for the theme, driving Siemens' stock price recovery from the majority of its losses caused by the market-wide sweep of "AI disrupting everything" since early February. The core of the concerns of these investors is that AI may enable companies to write software themselves, rather than relying on expensive software products from suppliers like Siemens. Examples of Siemens' range of products include automakers using the so-called Teamcenter software to manage the design and manufacture of car battery components. Andre Kukhnin, a senior analyst at Rothschild & Co Redburn, said, "When we look at customer groups such as aerospace and defense, automotive, or consumer electronics, the cost of making mistakes is too high. It doesn't make sense to save tens of thousands of dollars in software license fees while having to run more design prototypes or real-world simulations and tests." Currently, the integration of acquired assets and the adjustment of sales models have brought a drag on the digital industry division; the division accounted for about 22% of the group's total revenue in the 2025 fiscal year. Neike stated that the division has almost completed its transition to a cloud computing subscription model. In the process of customers switching from one-off upfront license fees to recurring fees, this transitional phase has somewhat suppressed revenue. With this transition largely completed, software updates can now be delivered with one-click convenience in the cloud, rather than through separately installed software packages. Neike said, "Now, even smaller companies that couldn't afford a full suite of expensive software in the past, or couldn't access such software, can now do so." He said that although the pricing system needs to evolve from the current user-based model to a usage-based or enterprise-level operating model, it will continue to operate on a subscription basis. As shown in the figure above, Siemens is shifting from its industrial base to software growth, with software accounting for over a third of the revenue in the digital industry division in the 2025 fiscal year. Under the leadership of CEO Roland Busch, Siemens remains a global leader in train and industrial core equipment manufacturing, but has accelerated its move into the software field in recent years through acquisitions such as Altair and Dotmatics, with a total acquisition amount of approximately $15 billion. In an interview in January, Busch said the company is seeking more acquisitions related to artificial intelligence, life sciences, and operations software. As one of the longest-operating large industrial enterprises today, this global engineering and technology leader has repeatedly reshaped its business portfolio, spinning off former core businesses such as Osram, chip manufacturer Infineon Technologies AG, and the recently favored gas turbine manufacturer Siemens Energy AG, medical device manufacturer Siemens Healthineers AG, among others. The software transformation of this traditional industrial giant, headquartered in Munich, can be traced back to its acquisition of UGS Corp in 2007. Today, the digital business accounts for about a third of the revenue in the digital industry division. James Moore, head of European capital goods at Rothschild & Co Redburn, said, "Siemens has mastered the process of factory floor automation and holds a very strong market share in engineering software. If Siemens can secure a leading position in emerging industrial AI technologies - facing new competition from US tech giants like Amazon and Google, it could enjoy stronger fundamental growth than in the past." Siemens, with its deep roots in industrial automation, engineering software, factory infrastructure, and physical assets, is seen as an important representative of the current global investment theme of "HALO". Some Wall Street analysts believe that Siemens' more accurate label is as a "large industrial AI platform stock wearing the HALO halo". This is why the company's long-term bullish investors are more confident than many investors in pure software companies, and its gross profit margin and operating profit margin are much stronger compared to those of the pure energy or utility-type HALO heavy asset targets. Siemens is shining with its HALO halo As the narrative logic of "AI disrupts everything" has severely hit the US stock market, which leans towards digital assets and light assets, investors seeking alternative choices outside the US stock market have gradually favored the "old economy" sectors in the European region that are asset-intensive and have stable cash flows. Particularly, traditional European industrial giants like Siemens are gaining favor among retail investors and high-leverage hedge funds, as they have heavy asset entities and low AI replacement risk "HALO" stocks, which have high weights in Europe and tilt towards heavy asset stocks in the US. Strategists at Goldman Sachs, a Wall Street financial giant, published a research report stating that stocks of heavy asset companies with tangible production assets are significantly outperforming the global stock market, which is also the core logic behind the outperformance of European stocks over US stocks. Global investors, including hedge funds and retail investors, are actively seeking safe havens that can escape the storm of "AI disrupts everything", and are turning their investment focus to stocks of the HALO category, entities with heavy asset intensity and low AI obsolescence risk. These stocks have a high weight in Europe, while US stocks lean towards "lightweight capital" stocks. The "HALO effect" referenced in the report by Goldman Sachs does not refer to the commonly known "halo effect" in psychology, but rather to companies whose value mainly comes from tangible assets with high replicability costs and long lifespans, such as physical assets, core capacity, manufacturing networks, and infrastructure. Thus, they are considered less likely to be rapidly replaced or "technologically eliminated" by AI, and are more likely to receive a "haven premium" in times of heightened AI anxiety. Siemens is an important representative of the "HALO" theme that has been popular worldwide, as it not only has software and digital business, but also has a strong industrial automation, engineering software, factory infrastructure, and real physical asset exposure, making it not a "pure software story" that is easily disrupted overnight. In the view of some Wall Street analysts, Siemens is more accurately labeled as a "large industrial AI platform stock wearing the HALO halo", which is why the company's long-term bullish investors are more confident than many investors in pure software companies, and its gross profit margin and operating profit margin are much stronger compared to those of the pure energy or utility-type HALO heavy asset targets.