Embodied AI: Investing in the Future of Humanoids, Robotics, and Autonomous Mobility

With a projected market opportunity of ~US$5 trillion by 2050, this mega-theme offers both long-term potential and near-term earnings opportunities. In this article we explore the key drivers and trends to watch for as this exciting new era of technology unfolds.

What sets the humanoid thematic apart is the sheer size of the potential market opportunity. In effect the humanoid theme is addressing the global labour market of ~US$30 trillion. Morgan Stanley projects the global humanoid robot market to reach ~US$4.7 trillion in annual revenue by 2050.

Morgan Stanley identifies that ~75% of occupations and ~40% of employees in the US have some degree of ‘humanoidability’, representing an addressable market of ~US$3 trillion in the US alone. The immediate opportunity is to address industries with clear labour shortage problems – this could be for a variety of reasons such as being dangerous, repetitive or boring, with sectors such as transportation and warehousing becoming early adopters.

Beyond humanoids, other forms of robotics are rapidly monetising as we advance in the autonomous journey. Industrial robots, service robots, cobots and drones are all gaining traction in China robotics production, with a ~US$100 billion Total Addressable Market (TAM) by 2028.

Autonomous vehicles and shared mobility are nearing an inflection point, driven by advances in AI driven autonomy, falling technology costs and improved regulatory support. Morgan Stanley expects around one in four cars to feature smart driving by 2030, creating a ~US$200 billion market for self-driving vehicles.

This immediately provides wide ranging montetisation potential in the auto related sector – for example robotaxis are already operating. Morgan Stanley anticipates that Tesla Inc will have ~10,000 vehicles in service in five years time.

• Industrial robotics: Driving further autonomy and speed of production to global warehouses, companies who are implementing industrial robotics are set to make considerable cost-based savings, generating more attractive profit margins from automating their processes.
• Industrial agriculture: While it is a gradual process getting autonomy in vehicles on public roads, autonomy on farms and fields is now possible. A recent Morgan Stanley AlphaWise Survey in the US showed ~14% of farmers currently have automation for tractors and harvesters.
• Robotaxi: The opportunity to bring automated rideshare to public transport services brings multiple players into the mix and is a trend worth watching.
• Supply chain battery manufacturers: battery demand is expected to grow rapidly in the next five years, and could also benefit from a rebound in electric vehicles. Additional opportunities present in larger scale production of humanoids where the battery will be a key supply component.
• Robotics supply chain: Key robotics suppliers, mainly located in China, will be the main beneficiaries when momentum and production gain pace. Some well-established suppliers are worth monitoring.  
• Critical minerals: The ~US$5 trillion projected market for humanoids by 2050 could mean incremental demand for critical minerals of ~$US800 billion across lithium, cobalt, rare earths, nickel, and copper. Morgan Stanley expects demand to be very significant for rare earths and lithium.

Embodied AI is not just a futuristic concept - it’s a rapidly evolving investment frontier. From industrial automation to humanoid robotics, the theme offers a spectrum of opportunities for investors seeking exposure to transformative technologies. As milestones unfold, Morgan Stanley Wealth Management Australia continues to identify and support high-quality companies positioned to lead this revolution.

To hear our Equity Strategist, Simon Clark, talk further about this topic please view this recent interview on Ausbiz.