Now could be an attractive entry point for investors looking to add exposure to the robotics and automation sector.
The ROBO Global Robotics & Automation Index ETF (ROBO ) garnered a premium valuation relative to the Invesco QQQ Trust (QQQ ) for much of the past decade. However, fears around end-markets and tariffs have disproportionately weighed on ROBO’s holdings. That could potentially create an opportunity to buy in at a discount.
Notably, valuations are currently at historic lows based on price-to-NTM-earnings ratios, and robotics stocks are trading at their greatest discount to QQQ ever. Current valuations are even below the depressed levels from March 2020 at the onset of COVID-19 market volatility.
Valuation Disconnect Creates Opportunity
The AI boom premium has now been completely erased despite a constructive outlook for the robotics and automatic sector. Demand for automation solutions will likely ramp up and accelerate swiftly due to a focus on sovereign industrial security worldwide.
Companies crucial to domestic and global manufacturing will most likely increasingly turn to automated solutions, and onshoring will likely drive more growth for the robotics and automation sector.
It’s important to remember that AI is helping expand existing automation markets as well as create new markets. 80% plus of GDP could be unlocked into the scope of robotics and AI. This could ultimately expand to over $50 trillion dollar addressable market over the coming decade.
For a related discussion on AI, please join our upcoming webcast on May 2 at 11 a.m. Eastern: Investing in AI: Separating Hype From Reality in the AI Revolution.
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VettaFi is the index provider for ROBO ETF, for which it receives an index licensing fee. However, ROBO ETF is not issued, sponsored, endorsed, or sold by VettaFi. VettaFi and its affiliates have no obligation or liability in connection with the issuance, administration, marketing, or trading of ROBO ETF.
