Weekly Wisdom: Scaling of the Robotics Value Chain

From Artificial Intelligence to Physical Intelligence

For the last several years, investors have focused on Artificial Intelligence through software, cloud infrastructure, semiconductors, and data centers. Increasingly, however, the conversation is shifting toward what many call “Physical AI” or “Embodied AI” as the ability for AI systems increasingly moves towards interacting with and manipulating the physical world through robots. We have been constructive on robotics for some time, discussing the topic in past Weekly Wisdoms, and we continue to view the sector as a compelling long-term opportunity in technology. Robotics will play a large role in markets soon, with Morgan Stanley estimating that humanoid robotics could ultimately become a $5 trillion global market opportunity, making it one of the largest emerging technology markets over the coming decades.¹

This transition was especially highlighted in Amazon CEO Andy Jassy’s recent shareholder letter. In the letter, Jassy noted that the scale of robotics at Amazon, now operating more than 1 million robots across its fulfillment network, describing robotics as a key driver of productivity, efficiency, and operational improvement. Amazon’s robotics fleet now works alongside more than 750,000 employees in fulfillment operations, helping improve inventory placement, order accuracy, and delivery speeds.² Importantly, Amazon views robotics as an extension of AI rather than a separate technology initiative. As advances in machine learning, perception, reasoning, mobility, and dexterity continue to improve, robots become increasingly capable of performing tasks that historically required human labor.

Commercialization Begins to Accelerate

A growing number of strategic partnerships are emerging throughout the robotics ecosystem. The industry’s evolution is increasingly being driven by a “legacy-startup crossover,” where established industrial companies are partnering directly with robotics developers to accelerate commercialization. These relationships go beyond traditional supplier agreements and focus on application development, data collection, and real-world deployment scenarios that help improve robot performance over time.

One notable example is the partnership between UK-based Humanoid and Schaeffler. The agreement includes both actuator supply contracts and humanoid robot purchases for Schaeffler’s global manufacturing network over the next five years, aiming to deliver up to 2,000 robots by 2032. China’s State Grid also announced plans to deploy 8,500 embodied AI systems, including 500 humanoid robots, for utility maintenance and infrastructure inspection.³ These deployments are significant because they demonstrate that robotics is beginning to address real labor shortages and productivity challenges rather than simply serving as proof-of-concept demonstrations.

Commercial activity is also accelerating among robot manufacturers themselves as RobotEra recently achieved thousand-unit shipments while reporting growth of more than 300% year-over-year.⁴ Unitree has continued expanding production capacity and commercial deployments across industrial and enterprise applications. While adoption remains early, the progression from prototype to deployment mirrors the commercialization path seen in previous disruptive technologies.

Capital Flows Fueling Development

One of the strongest signals supporting the robotics opportunity is the amount of capital flowing into the sector. Morgan Stanley estimates that approximately $26 billion has been committed through various government-supported robotics and embodied AI investment funds across China.⁵ These funds support everything from AI model development and advanced manufacturing to robotic components and deployment infrastructure. Transformational technologies require significant investment before widespread adoption occurs. In the same way the internet required fiber optic networks and cloud computing required hyperscale data centers, physical intelligence will need massive investments in semiconductors and computing infrastructure. The pace of funding has accelerated dramatically over the past year, reflecting growing confidence that Physical AI may become one of the most important technology platforms of the next decade.

Investment Opportunities Behind Supporting Robotics

Investment opportunity extends far beyond the companies building humanoid robots themselves. Morgan Stanley’s “Humanoid 100” framework identifies companies across the entire robotics ecosystem, including semiconductors, sensors, batteries, actuators, software, vision systems, rare earth materials, and manufacturing platforms. This framework divides the market into three categories: the “Brain,” which includes AI models, semiconductors, simulation software, and computing infrastructure; the “Body,” which includes batteries, sensors, motors, actuators, bearings, and precision components; and the “Integrators,” which assemble complete robotic systems.

Investors have also begun rewarding companies exposed to the robotics value chain. Since its inception in February 2025, the Humanoid 100 index returned approximately 62%, significantly outperforming the S&P 500, MSCI Europe, and MSCI China.
Companies associated with the “Brain” portion of the humanoid ecosystem have materially outperformed both robot integrators and many hardware suppliers. Among the index, Intel has gained more than 500% since its inclusion, while Samsung Electronics has risen more than 450%. Other leaders, such as, Hyundai, Teradyne, Flex, STMicroelectronics, LG Electronics, and MP Materials also generated exceptional returns above 150% in just over a year. This mirrors what we observed during the early stages of the AI revolution, where infrastructure providers often captured significant value before end applications reached scale.⁶

For now, commercialization remains in the early innings. However, the combination of policy support, accelerating investment, real-world deployments, and improving technology suggests that Physical AI is moving from concept to reality. If the first wave of AI taught computers how to think, the next wave may teach machines how to work. We continue to believe robotics represents one of the most compelling long-term secular growth opportunities in technology and one that investors should follow closely in the years ahead.

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[1] Morgan Stanley Analyst Note, as of May 29, 2026
[2] Andy Jassy 2025 Shareholder Letter, as of April 9, 2026
[3] Bloomberg Intelligence, as of May 28, 2026
[4] Morgan Stanley Analyst Note, as of May 29, 2026
[5] Morgan Stanley Analyst Note, as of May 29, 2026
[6] Bloomberg, as of June 3, 2026