AI speeding development of humanoid robots, but investors skeptical

Investors on the hunt for real-world applications of artificial intelligence may want to consider humanoid robots, which some analysts predict could begin replacing human workers at scale by the end of the decade.

“Breakthroughs in generative AI are bringing 3D perception, control, skill planning and intelligence to robots,” Rev Lebaredian, Nvidia’s vice president of omniverse and simulation technology, told CNBC. “Humanoid robots will help close the gap as labor shortages increase around the world, especially in sectors like retail, warehousing and distribution or manufacturing.”

Some analysts say there’s a bigger market for these kinds of robots than for robotaxis and other autonomous vehicles. And while advancements in autonomy have driven up the share price of stocks such as Tesla, analysts suspect not much value has been priced in for the potential of humanoid robots, creating an opportunity for investors who want to bet on the emerging technology. Adding to the bull case, some think President-elect Donald Trump’s expected deportation efforts could be another boon to automated labor.

The best use cases are yet to be determined. While the adoption of humanoid robots could pick up rapidly in factories, RBC analyst Tom Narayan sees the big upside coming from when — and if — humanoid robots can be part of a consumer’s everyday life. The real opportunity is in “more than just cutting vegetables,” he said. 

“I think the majority of the value [in humanoid robotics] is not on the industrial side. … It would have to be on the consumer side, like in people’s houses — like a personal assistant to help raise your kids or babysit,” Narayan said in an interview. “In most manufacturing plants in the U.S., for example, robots are already working. If you look at auto, most of those plants are already largely automated.”

Predictions already anticipate massive sales, but Wall Street’s estimates are wide-ranging:

• Morgan Stanley predicts the humanoid robot population will be 40,000 by 2030 and swell to 63 million by 2050. 
• Citigroup is even more bullish, predicting a $7 trillion humanoid robot market by 2050 with 1.19 billion humanoid robots in operation.
• Goldman Sachs forecasts “significant growth in humanoid robotics” with a total addressable market of $38 billion worldwide by 2035. Robot density per worker has already doubled from 2016 to 2022, the firm noted.
• Macquarie expects there to be 6.3 million humanoid robots by 2035. By the end of that year, the firm estimates, the global market size for humanoid robots will reach a whopping $139 billion, with a 50% compound annual growth rate between 2026 and 2035.

Morgan Stanley’s Adam Jonas anticipates humanoid robots will be a multidecade, trillion-dollar opportunity largely because the adoption curve could accelerate faster than for autonomous cars on public roads.

Far more capital will be pumped into the humanoids given the thousands of repetitive and dangerous human tasks that could be made significantly easier with robots being incorporated into factory lines, warehouses and kitchens, Jonas wrote in a September note to clients.

“The urgency to scale humanoids is palpable,” Morgan Stanley equity strategists Edward Stanley and Matias Ovrum wrote in a recent note. “The number of catalyst events is on the rise, and we expect U.S. workers to begin being substituted from 2030 onwards.” 

Just a few publicly traded companies are looking to meet this need. Many are electric vehicle makers with AI skills. XPeng, Nvidia, Tesla and Xiaomi are at the forefront and could be major long-term beneficiaries, Morgan Stanley and Goldman analysts said. There’s also a slew of hot startups.

XPeng, a Chinese auto giant, is poised to capture “the next AI megatrend,” according to Morgan Stanley analyst Tim Hsiao.

The company’s AI Technology Day in early November gave investors a peek at how far humanoids have come. Its second-generation humanoid robot Iron is integrated into XPeng’s factories and stores and uses XPeng’s own chips to operate its more than 60 joints and 200 degrees of freedom with technology shared from its AI vehicles, XPeng said.

A leader in humanoid robots, XPeng’s first-generation PX5 was released in October 2023. 

After the event, Hsaio reiterated an overweight rating and raised his price target by $6 to $17, which implies more than 33% potential upside from Friday’s close. Shares have fallen more than 14% this year, hurt by China’s economic growth struggles and concerns that growing EV competition will pressure auto sales.

However, Hsiao said XPeng has a strong vehicle pipeline, established smart driving capabilities, and an enriched ecosystem of humanoids and other products, such as its eVTOL multicopter aircraft.

“XPeng shares offer superior risk-reward among major EV start-ups,” Hsaio wrote in a Nov. 6 note to clients. “To rival increasing tech entrants, XPeng’s investment in embodied AI via autonomous driving and humanoids will be continuous.”  

Xiaomi is another Chinese company that’s been tackling humanoid robots, Morgan Stanley said. Its shares have rallied roughly 94% year to date.

Xiaomi first announced its CyberOne humanoid in 2022, unveiling a robot that it said was capable of perceiving three-dimensional space and recognizing individuals and expressions in its environment. CyberOne also has characteristics of a human friend — as it is able to recognize dozens of classifications of human emotion, the company said at the time of release. “CyberOne is able to detect happiness, and even comfort the user in times of sadness,” it said.

The Chinese humanoid industry has received substantial government support that’s led the country to produce “some of the most advanced humanoids revealed to date,” Morgan Stanley’s Jonas said.

China — the world’s largest car manufacturer and biggest car market — is, by far, also the top robot market in the world, according to the International Federation of Robotics. Policymakers have recently been pushing the technology as a way to further industrialize and grow the country’s struggling economy, which is also facing a population crisis.

China’s Xinhua News Agency reported Thursday that local government officials in China have released robotics policies and unveiled a plan, which will run until 2029, promoting the innovation and deployment of humanoid robots.  

According to Citi, China has accounted for 78% of all robotics patents over the past two decades.

Closer to home, Tesla is a big player with the ear of the incoming Trump administration, which could open the door to more support of the emerging industry and accelerate the company’s robotics developments to help it compete with rivals in China.

Tesla’s ambitions in the space have become one of the biggest talking points behind the company’s long-term growth forecasts, particularly as it struggles to sustain its domestic EV market share.

“While we see some fundamental headwinds to the core auto business over the near to medium term, we also believe the stock could remain at a higher multiple to reflect the long-term opportunity tied to [full-self driving]/robotics given broader market interest in potential AI beneficiaries,” Goldman Sachs analyst Mark Delaney wrote in a Dec. 3 note to clients.

Investors have notably remained in wait-and-see territory when it comes to Tesla’s humanoid robot plans.

The company first revealed its ambitions to work on humanoid robots in 2021 at an AI Day event. However, its Optimus robots, seen folding laundry in a demo video earlier this year, were criticized for being operated by humans using controls, rather than acting autonomously. CEO Elon Musk hasn’t been clear on Optimus’ capabilities, but claimed in June that its humanoid robots could eventually boost Tesla’s market cap to $25 trillion.

Tesla’s shares have popped about 46% over the past month, largely because of Musk’s close ties with Trump.

Deutsche Bank analyst Edison Yu has reiterated his buy rating on the stock, saying the incoming administration could drive increased support for Tesla’s humanoid robotics.

“Beyond attributing the price action to tactical factors, we see potential large terminal value benefits to Tesla’s efforts in auto, robotaxi, and even humanoid robotics,” Yu wrote in a Nov. 12 note.

Yu said the Trump administration could back the development of a supply chain that could support the industrialization of humanoid robots, which he said would need to be produced at a large scale and low cost. That could look similar to the federal support given to the semiconductor industry, he said. Trump’s expected hard-line immigration policies could also eventually “lead to a smaller pool of cheap labor, thereby favoring more investment in automation,” he added.

Pockets of Wall Street are still deciding how to value Tesla’s grandiose robotics visions.

RBC’s Narayan is waiting to see how Tesla’s humanoid robot efforts will be deployed and applied in the real world, and has valued humanoid robots at just $5 of his $313 price target on Tesla stock. He remains bullish on Tesla’s progress in autonomy, particularly with its robotaxis and full self-driving technology, which account for most of his valuation.

“Tesla … has a market cap of over a trillion dollars. To me, for humanoid robots to be a big contributor to that, it would be on the consumer side. And I currently don’t include that just because I don’t know what that looks like,” Narayan said.

Macquarie and Morgan Stanley remain enthusiastic that Tesla, like XPeng, has its own in-house manufacturing plants for its humanoid robots, which could help cut costs. But Morgan Stanley is holding back on attaching the technology to its Tesla price target, as its $500 bull case on the company values its humanoid business at exactly $0.

Nvidia is a clear AI play, but investors are keeping an eye on its expansion into robotics, where the chipmaker focuses on providing the brains behind the robot. Wells Fargo analyst Aaron Rakers’ bull case on Nvidia predicts that the company’s Omniverse robotics business could offer additional upside.

Several companies racing to make humanoid robots are using Nvidia’s Project GR00T model, which was announced in March. Nvidia also announced a supercomputer called Jetson Thor earlier this year for deploying into humanoid robots.

GR00T — or Generalist Robot 00 Technology — is a platform for developing humanoid robotics and includes foundation models, data capture and generation pipelines as well as robot simulation tools, Nvidia’s Lebaredian told CNBC. The company is working on several GR00T models, including ones for robot motion, whole-body control and multimodal sensing.

Lebaredian said XPeng, Agility Robotics, Apptronik, Boston Dynamics and Skild are among the humanoid robot makers currently developing on Nvidia’s robotics platforms.

“Humanoid robots are an ideal general-purpose embodiment because the world is built for humans — stairs, tools, shelving, kitchens, and workcells — and more,” Lebaredian said.

Sentiment around humanoid robotics appears to agree on one thing: Humanoids could make everyday life easier, and therefore more advanced.

“What many people really want is help with mundane tasks, such as cleaning, so they can do more thinking, art, and leisure. AI robots can help with this utopian angle,” Rob Garlick, Citi Global Insights head of technology and innovation, said in a note to clients this month.