Let’s start with the bad news. The robotics space has underperformed broader tech over the past 18 months. Given the advances and investment in AI tech and infrastructure, you may wonder why.
Several factors are at play:
- Being truly CapEx intensive, higher interest rates have impacted the robotics space (unlike AI CapEx, which has been more immune due to generational game theory forces).
- China, robotics’ largest end market, has experienced material weakness over the past 15+ months. However, China is still focused on major equipment upgrades and is entering a renewed cycle.
- We are entering a post-China manufacturing and general robotics era, witnessing the biggest manufacturing construction boom in over 40 years in the U.S. The now-global story encompasses India, Vietnam, Mexico, and Europe, too.
- The U.S. election year has put many reshoring initiatives on pause.
- Huge demand already impacts areas in chip manufacturing and energy, which comprise their own robotics megacycle.
- Together, energy, robotics, and artificial intelligence are the flywheels driving a rapid evolution. They form the core stack of the planet’s future.
The Evolution of Robotics
Since the 1960s, millions of robots have been used in manufacturing, logistics, surgery, and more. Now, use cases are ramping up, expanding robotics’ cyclical tie beyond industrial and into services markets. This is expected to expand the addressable market by more than five times by 2032 and perhaps 25–50 times by 2040.
Logistics is ripe for continued investment in automation at ports, on the roads, in warehouses, and beyond. Increased capabilities brought forth by AI have resulted in multiple trillion-dollar blue ocean opportunities for robotics. Whereas in the past, developers focused on single-use cases, now they work toward multi-functional, multi-environment, adaptive systems.
Service robots, home robots, and drones represent a near-limitless Total Addressable Market (TAM), bound only by the confines of materials and energy—both of which are experiencing their own innovation cycles.
The percentage of the world core GDP that is automated via AI and Robotics could reach a majority as soon as 2040. This represents one of the largest growth opportunities the world has seen.
Demand Grows
Port automation serves as an example of growing demand. The recent disruptions triggered by COVID-19 have highlighted how fragile supply chains are. Now, a labor strike may temporarily hit the U.S. economy. China’s ports are more automated and resilient, and the rest of the world will likely follow suit. Adopting automation solutions may minimize weak links, critical to sovereign independence. Members of the Global Robotics and Automation Index (ROBO ), like Cargotec and Kalmar, have exposure here to port automation.
ROBO Outlook
The “Three M’s” of robotics — make, move, and manipulate — comprise almost all human activities across all scientific disciplines. Now, we are entering a new era of making, moving, and manipulating. From Autonomous Vehicles to AI coders and humanoid robots, the developments are groundbreaking.
- Make: AI’s coding capabilities are constantly developing. Next, we anticipate voice to action, enabling the control of physical objects with full contextual understanding from voice alone.
- Move: Autonomous Vehicles (like Waymo, Alphabet’s Autonomous Vehicle and ridesharing app, which is now available 24/7 in multiple cities) open new gateways for automation in the physical world, much like smartphones did for human interaction with technology and information. We anticipate more autonomous multimodal movement (such as drones and pods) and concepts like overnight logistics networks known as “warehouses on wheels.”
- Manipulate: Humanoid robots’ capabilities to delicately interact with their environments represent a potential trillion-dollar-plus market and are being launched and adopted in real use cases.
Why Invest Now?
The robotics and automation sectors are at a critical inflection point, making it a compelling investment opportunity.
- Technological Convergence: The synergy of AI, IoT, and advanced materials accelerates robotics capabilities exponentially.
- Economic Imperatives: Labor shortages and rising wages drive unprecedented demand for automation across industries.
- Post-Pandemic Shift: COVID-19 has highlighted the need for resilient, automated supply chains and manufacturing processes.
- Expanding Applications: Robotics is moving beyond traditional industrial uses into services, healthcare, and even consumer applications.
- Geopolitical Factors: Reshoring initiatives and the race for technological supremacy are spurring investment in automation.
- Sustainability Drive: Robotics and automation are key to achieving efficiency and sustainability goals across sectors.
- Maturing Ecosystem: The robotics industry is evolving from speculative startups to established, profitable enterprises.
These factors combine to create a unique window of opportunity as the market underappreciates these major tailwinds. The ROBO index, positioned to capture this potential, offers investors exposure to the companies at the forefront of this transformative wave.
For more news, information, and analysis, visit our Disruptive Technology Channel.
