Investing in Humanoid Robots and Physical AI
Recently, Ryan Payne, president of Payne Capital Management, and market analyst Dan Geltrude discussed some exciting developments in technology. The focus was particularly on artificial intelligence (AI), SpaceX’s upcoming IPO, Microsoft’s innovative coding model, and the expansion of OpenAI’s “Mornings with Maria.”
The investment opportunity in AI is still relatively fresh, and some savvy investors are already on the lookout for what could be the next breakthrough in this realm. Interestingly, they might not need to search too hard. It seems that the future could revolve around two major innovations: humanoid robots and physical AI.
These concepts aren’t overly complex. Humanoid robots, as the name suggests, are designed to resemble and work alongside humans, performing basic tasks that enhance productivity. This technology is part of a broader category of physical AI, which includes systems like self-driving vehicles and surgical robots.
Smart investors are aware of several stocks and exchange-traded funds (ETFs) linked to robotics. If you’re particularly interested in humanoid technology, the KraneShares Global Humanoid Robotics and Physical AI Index ETF might be worth exploring.
A New Kind of ETF
This robot-focused fund tracks the MerQube Global Humanoid and Embodied Intelligence index and stands out as the first of its kind available for trading in the U.S. This unique positioning gives it an initial edge. Investors seem to appreciate this, given the fund’s clean structure, which celebrated its first anniversary on June 4 and currently boasts $241 million in assets.
Year-to-date inflows have reached $89 million, indicating that investors recognize the potential within this next-gen tech-focused ETF. Those sentiments make sense; Morgan Stanley projects that the humanoid robot sector could reach an impressive $5 trillion market value by 2050.
That said, it’s essential for investors to adopt a long-term perspective with this ETF, as humanoid robots are currently quite pricey. Nevertheless, falling costs could promote wider adoption. For context, in the past, a single humanoid robot had a staggering price tag of $200,000—which is, well, more than some houses! By 2028, Morgan Stanley forecasts that price to drop to around $150,000.
The lessons learned from earlier AI stocks emphasize the importance of recognizing emerging trends and real-world applications in humanoid robotics and physical AI. Picking stocks in these arenas can be tricky, even for seasoned investors, which is likely why many are turning to this ETF.
Understanding ETF Assets and Diversity
Robot stocks play a role across various sectors. This ETF reflects that diversity by including around 78% of its portfolio in a mix of technology and industrial stocks.
It’s also worth mentioning that this is a global ETF, as humanoid robotics isn’t confined to one geographical area. Notably, approximately 28% of its investments are in Chinese stocks, second only to U.S. stocks. China currently dominates the AI-driven robotics scene, particularly in humanoids, but it’s uncertain if this leadership will last forever, underscoring the value of global diversification.
The KraneShares Global Humanoid Robotics ETF has an annual fee of 0.69%, which translates to $69 for a $10,000 investment. While this is slightly above the average of 0.63% for thematic ETFs, the potential benefits might outweigh the costs.
