Goldman Sees The Humanoids Rising, Sooner Than You Think

Goldman Sees The Humanoids Rising, Sooner Than You Think
Russell Burns

about 1 month ago5 mins

  • Goldman Sachs estimates that the global humanoid robot market will grow by 70% a year through 2035, reaching $38 billion.

  • Huge strides in AI and falling component prices are speeding the development of humanoids, and boosting hopes that they could soon help address economic issues related to the aging population.

  • Most robotic-related stocks trade at lofty valuations – thanks to their high growth expectations. That’s taken a toll on the performance of robotic ETFs over the past couple of years, but if Goldman is correct and things are about to improve, there could soon be opportunities.

Goldman Sachs estimates that the global humanoid robot market will grow by 70% a year through 2035, reaching $38 billion.

Huge strides in AI and falling component prices are speeding the development of humanoids, and boosting hopes that they could soon help address economic issues related to the aging population.

Most robotic-related stocks trade at lofty valuations – thanks to their high growth expectations. That’s taken a toll on the performance of robotic ETFs over the past couple of years, but if Goldman is correct and things are about to improve, there could soon be opportunities.

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Science fiction has been promising this for a long time. Now, it’s finally starting to happen: humanoid robots are making their first clunky steps from the factory floor, heading toward workplaces and households. Recent, rapid strides in AI technology are helping to speed their pace, and that’s led Goldman Sachs to ratchet up its forecasts for the person-sized, person-shaped robot market. We’re heading into a robot age, the investment bank says. Here’s how you might profit from it…

What’s Goldman predicting?

The research gurus at Goldman Sachs say the global market for humanoid robots will see an average growth rate of 70% per year through 2035, and result in a global market size of $38 billion.

Their base case, or most likely forecast, predicts that the stepped-up advancement in AI will supercharge hardware development manufacturing supply chains for the industry. But things could move even faster: their optimistic, bull case scenario would see an annual 1 million humanoid robot shipments by 2031 (four years ahead of their previous thinking). And their blue sky forecast – think total upside in a perfect scenario – would see those robots becoming the next commonly adopted technology after EVs and smartphones. And, yes, this is basically predicting that everyone ends up having a humanoid companion.

Even these experts’ worst-case, or bear case, scenario for the industry would see just a two-year delay in the adoption of the high-spec humanoid robots – if, say, there are technological challenges or supply snags. So the message here is: resistance is futile.

Why so optimistic?

Well, for starters, Goldman’s research team has been struck by last year’s rapid advancements and improvements in AI. (Indeed, it appears to have struck quite a few people, judging by Nvidia’s share price last year.). Progress made in end-to-end AI (which is different from rule-based control) means the software system itself can execute tasks set from original commands – in other words, it “thinks” for itself and can figure stuff out.

End-to-end AI enables much faster product development and usage, producing better skills and more of them. So humanoid robots, with their large language models (LLMs), have image, text, and video reasoning and analysis abilities. And all of that is a game-changer. Just think back a few months when Tesla released a video of its Optimus robot showing this end-to-end AI capability. (The newest video shows Optimus slowly folding a shirt.)

What’s more, prices have fallen faster than expected. The cost to build a humanoid robot is now somewhere between $30,000 for a low-spec version to $150,000 for a high-spec. Compare that to last year’s prices, which ranged from $50,000 to $250,000. So that’s a price drop of about 40% in just a year (versus Goldman’s prior assumption for a 15% to 20% decline) as components have become cheaper.

And Goldman expects those prices to come down even more, initially as existing supply bottlenecks clear, and later as mass production drives increased efficiencies.

How will humanoid robots be used?

At least for a while, humanoid robots are likely to be used mostly for jobs in structured environments, such as manufacturing. They’re likely to pick up the jobs that are “dangerous, dirty, and dull”, Goldman says – meaning things like coal mining, disaster rescue, nuclear reactor maintenance, and chemical manufacturing.

Putting them to work in this way could improve companies’ overall health and safety records, reduce their injury and fatality rates, and help them with any staff shortages – especially in some of the less desirable roles. Goldman estimates that humanoids are likely to handle 5% to 15% of hazardous jobs and auto manufacturing roles.

But what’s less certain is whether general-purpose AI robots might soon be technologically viable to deal with consumer and household applications – for example, for elder care. If the humanoids can fill that role, the potential demand would fall in that “blue sky” scenario – as populations age.

Where’s the opportunity here?

This industry is changing fast. But for now, Goldman says, the best investment opportunities are in supply chain component stocks. It name-drops Harmonic Drive in Japan, Schaeffler and SKF in Europe, and Sanhua in China as potential success stories, given their technology capabilities, existing customer coverage, and level of research and development.

But in such a young and fast-growing industry, pinpointing the future winners can be tricky. So, ETFs with wider sector exposure could be a handy solution instead. There are a few to choose from. The Global X Robotics & Artificial Intelligence ETF (ticker: BOTZ; expense ratio: 0.69%) is one of the big ones, along with Cathie Wood’s ARK Autonomous Technology & Robotics ETF (ARKQ; 0.75%), which has an 11% weighting in Tesla. For European-based investors, there’s the iShares Automation & Robotics UCITS ETF (RBOT; 0.4%). Or if you’re looking to gain exposure to Japanese stocks and robotics, the Global X Japan Robotics & AI ETF (2638; 0.59%) could be an interesting choice.

Returns for robot-themed ETFs, from January 2022 to January 2024. Source: Bloomberg.
Returns for robot-themed ETFs, in US dollars, from January 2022 to January 2024. Source: Bloomberg.

And, look, returns for the robotic ETFs have been far from stellar over the past two years – in fact, they’ve all produced negative returns. See, the robotic theme has been around for some time – and these ETFs mostly hold stocks with high valuations and strong growth expectations. The sharp selloff in markets in 2022 hit these growth stocks especially hard and – even with last year’s AI boom – none of these have regained their old record highs. Now that could be an opportunity if Goldman is correct.

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