How to invest in robotics as the machines continue their rise
Robots are on the verge of breaking free from their limitations to spread throughout industry and beyond – with big implications for investors, says Matthew Partridge
Robotics “will soon be the largest market that we have ever seen”, says Mark Minevich, an AI strategist, and president and founding partner of Going Global Ventures.
One of the big limitations of artificial intelligence (AI) at the present time is that, in the words of an advertisement I spotted on the London Underground recently, ChatGPT can't mend a broken pipe.
Chatbots may not be able to physically fix things, but robotics is undergoing its own revolution, says Steve Brotman, the founder and managing partner of Alpha Partners. He predicts that “the use of robotics as the physical embodiment of AI will be a total gamechanger”.
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By 2030, there will be a cumulative total of one million installed robots, predicts Junwei Hafner-Cai, a senior analyst in the Polar Capital Sustainable Thematic Equity team. By 2040 it'll be 100 million, and by 2050 one billion. Robots are “increasingly able to execute intricate tasks previously reserved for skilled human labour”, says Yan Taw Boon, a fund manager at Neuberger Berman. That paves the way for factories, logistics hubs and even service industries to be disrupted.
For robotics, AI is the biggest game-changer
The single biggest force driving advances in robotics is AI, says Anjali Bastianpillai, a senior client portfolio manager at Pictet Asset Management. “Physical AI” – by which is meant its integration with human-like robots and other machines – will be the third pillar of the AI revolution, says Bastianpillai, and will be as important as the huge amounts of money being used to build data centres and the efforts to use AI to power a new generation of intelligent software. Advances in “reinforcement learning” mean that robots can now improve through trial and error, allowing them to “adapt to new environments far more effectively than before”, says Darius McDermott, a managing director at FundCalibre.
These advances in AI are taking place alongside hardware improvements that enable robots to do things traditionally considered too complicated for them, such as walking, picking up a box on their own, or manipulating an item with their hands, says Minevich. We are quickly moving from a situation where robots were “fixed in place and programmed to do one simple task”, to autonomous machines that “adapt to their surroundings, make decisions on their own and are able to do more than one task”.
Rapid improvements in robot technology have been followed by a surge in interest from companies, which want to “protect margins and get a good return on investment”, while dealing with the pressures created by the collapse of global supply chains, says Minevich. Faced with the need to move production back to countries with “ageing populations and rising wages”, robotics is increasingly seen as a solution that can help companies maintain profits and productivity. This could also benefit society, as Richard Clode of The Bankers Investment Trust argues. If we don't “embrace” robotics, he says, “we will not have enough workers to produce the GDP growth and taxes to pay for an ageing population”.
Companies are already “much more willing to adopt robots than they used to be”, says Valentin Antoine of TDK Ventures. Some “holdouts” and sceptics remain, but the fact that early adopters are “seeing tangible returns on investment” is changing minds at the executive suite and boardroom level. Antoine likens the demand for robots today to that for computers a few years after the first affordable models started to hit the market. The levels of interest and rate of adoption is already much higher than it was even three years ago, he says.
Robots have already taken over factories
Factories have long employed robots in some form, of course, so it's little surprise that industry will be at the forefront of the revolution, not least because the economics are so compelling. Research suggests that, at wages of $20 per hour, it takes just six years for an investment in a humanoid manufacturing robot to pay off, says Hafner-Cai. Given the projected fall in the price of such robots, this payback period will fall to just 1.7 years by the end of the decade and to around three months by 2050, even if wages stay the same.
Many companies are already quietly piloting the use of humanoid industrial robots, says Brotman, and within five years companies that don't have them in their facilities will be at a competitive disadvantage. Some Chinese firms already use “dark factories”, so called because they don't need any lights, as there are no humans there. Chinese factories that aren't using robots themselves may well now be giving their factory workers lots of gadgets and cameras that will provide the training data for tomorrow's droids, says Sam Hields, a partner at venture-capital firm OpenOcean.
The idea of empty factories and human workers inadvertently training themselves out of a job may seem a little dystopian, but Hields emphasises that robots can also improve safety by taking over some of the most dangerous and dirty jobs. OpenOcean has recently invested in Sitegeist, for example, a start-up that has made a robot for hydro-demolition – using water at very high pressures to remove concrete. Human doing the work can only stand it for 20 minutes at a time. Robots can work for much longer, as well as map the progress of what is taking place.
Robots head out on the highway
Robots are also starting to play an increasing role in retail and logistics. These sectors are vital to our modern on-demand economy and create a lot of jobs “that can be very difficult for workers, due to the sheer tedium of checking and transporting thousands of items each day”, says David Pinn, CEO of real-world AI firm Brain Corp. The ability of robots to “understand the environment in which they are operating” means they can now start doing more work previously done by humans, including such tasks as scanning shelves to find products that are out of stock, or have missing price labels and products. Enthusiasm for stockroom and warehouse automation is spreading from cutting-edge retailers such as Walmart to other supermarkets and big stores. Robots powered by BrainCorp’s AI are now being deployed in larger facilities, often spanning multiple buildings, bringing greater efficiency to factories, distribution centres and warehouses.
Factories and warehouses are environments where everything, including the temperature, is closely controlled, of course. Places such as airports present more of a challenge, says David Keene, CEO of Aurrigo. However, even here the shortage of staff created by pandemic-era layoffs has forced airports to overcome the scepticism that you'd expect in such a conservative, highly regulated industry, and embrace the automation of tasks including baggage handling and the transfer of passengers to and from planes.
The biggest unstructured environment of them all is the open road, and there have been huge strides in autonomous driving in recent years. We're probably still at least a decade from seeing fully self-driving cars becoming the norm, says Keene, but it's impressive that many of the big names, such as Waymo, are confident enough to test their vehicles on London's complicated and often-chaotic roads. “Just like a robot Frank Sinatra, if self-driving cars can make it in London and Europe, they can make it anywhere,” he says.
Indeed, the technical challenges have largely been overcome, and regulators are the only major remaining roadblock, says Blake Heimann, a senior associate at WisdomTree. Even a year or two ago, there were very few people who had actually been driven in a Waymo or a Tesla robotaxi. Now, however, many visitors to Austin or San Francisco will have experienced driverless cars, whether that's a regular taxi or one ordered over an Uber. Indeed, China has already found that autonomous vehicles “have a lot fewer accidents and deployment of airbags than conventional cars”, says Bastianpillai.
The rise of robotic surgery
Autonomous vehicles aren't the only area where introducing robots could boost safety, says Bastianpillai. There is already substantial evidence that having surgeons use robots to carry out procedures can lead to better outcomes. Moving to a situation where surgeons sit at a console with two Xbox -type controllers, wearing 3D glasses, means that “a wider range of people can do more procedures a day for much longer”, says Andrew Williamson, a managing partner at Cambridge Innovation Capital (CIC).
This is important as only around a third of young surgeons are able to do the most advanced manual procedures, such as orthoscopic surgery. Even those who do manage to master the advanced techniques typically burn out by the age of 50 because “it's such a strain on the body to contort yourself into different angles to do all of the procedures”. In contrast, even though Williamson has no medical training, it took him just 30 minutes to learn how to use a surgical robot made by CMR Surgical (which CIC has invested in) to sew basic sutures on a training dummy.
Most current systems are set up so that the surgeon sits in the same operating theatre as the patient with the robot alongside them, says Williamson. But it should be relatively simple to move to a “hub-and-spoke model”, where you could have one expert surgeon sitting in Beijing, for example, using robots to carry out surgery in district hospitals out in rural areas. Mark Minevich thinks that predictions that everything will be done by surgical robots within two to three years are somewhat wild, but at some point soon routine procedures are likely to be done by robots under supervision.
Robots in the kitchen
Robotics is even spreading into the service sector, especially in countries such as Japan, says Miyako Urabe, a portfolio manager at the JPMorgan Japanese Investment Trust. You can now walk into a sushi restaurant, finish your meal, pay and walk out without talking to a single human being. You get your own seat assigned by a machine and order on a tablet, the food is delivered on a conveyor belt and finished plates are slipped into a hole next to your seat. Even the food is increasingly produced by robots that “can imitate the craft of the best chefs”.
Many Asian hotels also now make extensive use of robots, says Matteo Borghi, associate professor of entrepreneurship and innovation at Henley Business School. Guests arrive to be greeted by robots in the lobby that provide them with directions and help them check in. Robots are also an increasingly common sight behind the scenes, providing cleaning services and delivering amenities and food to people's rooms. Attempts to run hotels staffed solely by robots have floundered “because people still want the human touch” and European hotels have been more cautious “because they are worried about their reputation”. But the direction of travel is clear “and some hotels are now starting to partner with manufacturers”.
How long will it be before we can all get our own robot maid or butler? Hafner-Cai is relatively cautious, thinking that domestic work and caring will be among the last sectors to see the mass arrival of robots, coming after manufacturing, logistics and even medicine, “due to the safety concerns in interacting with elderly people and small children”. Customer acceptance may be another issue. Measurement technology company Hexagon suggests that, while 63% of adults globally are comfortable interacting with robots in industrial environments, only 46% are comfortable doing so in the home.
Still, it's significant that the key constraint is now “trust, safety and reliability rather than technical capability”, says Omar Moufti, a thematics and sectors product strategist at BlackRock. The Consumer Electronics Show in January showcased a lot of “consumer-focused robots”, notes WisdomTree's Heimann, and although the demonstration models on display still suffered “plenty of hiccups”, they are definitely improving. The first products are starting to hit markets. Unitree is planning to offer its humanoid G1 robot for $16,000, “potentially making it worth the time saved” for high earners who need a helping hand at home. Heimann believes domestic robots could hit the mainstream in as little as five to ten years. We look at the best investments to play the theme in the box below.
How to invest in the robotics revolution
The most direct way to play the robotics revolution is through an exchange-traded fund (ETF), such as the WisdomTree Physical AI, Humanoids and Drones Ucits ETF (LSE: PAIG). This tracks WisdomTree's own proprietary index, which covers what it considers to be the leading companies in four areas: humanoids; drones and autonomous mobility; next-generation factories and logistics; and emerging applications (such as healthcare). The fund is exposed to all parts of the supply chain, from the firms that build the robots, to those that supply key components. The two largest holdings are Ubtech Robotics and Rainbow Robotics, and the ETF has a total expense ratio of 0.45%.
Another option is the iShares Automation & Robotics Ucits ETF (LSE: RBOT), which tracks companies that make robots, alongside software companies and semiconductor firms. The largest holdings include Intel and Terradyne, and the total expense ratio is 0.4%.
Another holding in WisdomTree's ETF is the Korean car company Hyundai Motor Company (Seoul: 005380). Hyundai has ambitious plans to deploy humanoids in their factories over the next few years, says Blake Heimann, and owns robotics company Boston Dynamics. Even today, Hyundai already has “hundreds of welding robots, automated guided vehicles and even robot dogs doing some spot inspections” in its most advanced factories. Hyundai has seen its revenue grow by 80% between 2020 and 2025, but the stock still trades at only ten times 2027 earnings. The yield is 2.3%.
Fanuc (Tokyo: 6954) specialises in precision engineering, industrial robots and automation systems. Its main focus has been traditional static machines anchored to one spot, but it is moving into “co-bots” (robots that collaborate with human workers). It also helps companies develop “smart” factories. The stock trades at 30 times 2027 earnings; this is justified by the fact that its revenue has grown by more than 50% since 2025, with earnings per share doubling during this period. The firm also enjoys large operating margins of around 20% and a return on capital employed of just under 10%, allowing it to generate enough cash to pay a dividend yield of 2%.
A slightly riskier option is Aurrigo International (Aim: AURR). The firm focuses on autonomous vehicles in airports, used especially for baggage and cargo handling. The firm has also developed a software platform that enables people running airports to redesign their operations to take account of developments in automation. The company is currently losing money, but it has already more than doubled revenue between 2020 and 2024. CEO David Keene emphasises that the company is starting to win international recognition and is already working with Changi Airport in Singapore and Cincinnati Airport in the US, with additional interest from Canada and the Persian Gulf.
Richard Clode, co-manager of The Bankers Investment Trust, thinks that companies that design and sell robots won't be the only big winners from the robot revolution. He's very bullish on manufacturing firm Jabil (NYSE: JBL), due to its role in assembling robots and automation technologies. Jabil is currently working with US leading robotics firm Apptronik to help accelerate production of its humanoid robot, Apollo, as well as integrating Apollo into Jabil's own manufacturing processes. Despite seeing its profits more than quadruple between 2020 and 2025, Jabil stock trades at just 18.5 times 2027 earnings.
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