We have been discussing humanoid robots with our clients recently as there is a huge amount of advancement taking place, and we expect Asian tech companies to play important roles in this market.
Today the focus in AI is large language models (LLMs), but we think the next wave will be agentic AI (autonomous AI systems that can achieve complex goals with limited human supervision) and physical AI (humanoid robots). These advancements will drive demand for many years to come, in our view.
Humanoid robots are being rolled out in factories already. Carmakers including Hyundai, Tesla and BMW are introducing or planning to introduce them on the factory floor to do jobs that are difficult or repetitive for humans.
Empty the dishwasher
The robots are not quite ready for people’s homes yet. You can find videos online of humanoid robots slowly emptying a dishwasher or watch a humanoid finish the Beijing half marathon in record time, with several others crashing along the way.1
The new generation of humanoid robots will be able to perceive, learn and act autonomously, with rigorous safeguards. Our view is that humanoids for the home will be capable enough by 2030 for early adopters and gadget lovers. Mass marketing and wider adoption will follow, so that by 2035 we would expect they will be more common.
The cost will be in the region of what people might spend on a car, roughly $20,000 to $100,000, and some families might have more than one. They will help with the housework - unloading the dishwasher, of course, folding laundry, gardening - and so much more.
Rapid growth
A Bank of America Global Research note2 in March estimated that the humanoid robot population could grow rapidly: 1.2 million in 2030, 10 million in 2035 and potentially 3 billion units globally by 2060, outnumbering cars per capita. BofA said industrial and service industry applications are expected to thrive first, but household humanoids will ultimately account for the largest share of the market.
We met with an insurance company in Australia recently that was one of the early adopters of AI to improve productivity. They expect humanoid robots to provide additional research data that will allow the company to offer bespoke prices for home insurance customers, rather than basing the price on the home’s postcode or area. On the other side, your home robot will be able to compare prices and choose the best quote on your behalf. As a customer, you might say: “Sort out my home insurance,’’ and you will be able to leave the rest of the admin to your robot.
Direct beneficiaries
There are several companies in Asia that we would expect to be direct beneficiaries of the growth in humanoids. We do not know who will develop the best humanoid robots or physical AI products or services. It could be Apple, Tesla, Samsung or perhaps companies we do not even know of today. But whoever it is, we are confident that the Asia’s tech companies will be among the enablers.
We believe the Asian tech supply chain, including the companies in Taiwan and Korea, are the best way to invest in the growth in the current and next wave of artificial intelligence. Taiwan Semiconductor plans to manufacture the high-performance "brains" and embodied AI logic units for the leading robotics developers. SK Hynix and Samsung Electronics expect to provide memory chips, and Samsung may even produce its own robots for an integrated smart home. Hon Hai pans to provide contract mass-production capabilities.
We know there are risks, and that there are likely to be periods of volatility as these products come to market. Nevertheless, these supplier companies trade at attractive valuations - in most cases well below those of the big US tech companies, and in some cases the Asian companies are getting cheaper on a price-to-earnings basis because their earnings are growing faster than their share prices.
More than just tech
We have talked about the technology sector and the exciting potential of humanoid robots, but it is important to note that one of our core beliefs is the importance of owning a diverse portfolio of stocks. It is not all about technology.
We are experienced and long-term investors in Asia, and our focus is on building all-season portfolios that can manage through the inevitable periods of market volatility. This could mean owning a balance of companies exposed to US and global demand, as well as companies selling products and services to domestic consumers in India, Southeast Asia and Australia, where business should be resilient even in a period of slower economic growth globally. It could also mean owning energy companies, producers of commodities such as gold and copper miners and owning defence companies.
We look for a combination of growth and value - companies that will grow their earnings and therefore be able to deliver growing dividend streams, which are reasonably priced, with strong balance sheets and good governance.
Footnotes
2Bank of America Global Research, Physical AI, part 2: Humanoid robots.
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