While robots have been a fantastical part of sci-fi Hollywood movies over the years, whether it's Arnold as the Terminator or the various machines of the Matrix, they are now much closer to reality, and more useful.
Robots are fast becoming a part of the world around us, helping as assistants for elderly care, providing support in medical procedures and surgeries, carrying out cumbersome and risky processes in mines and industries, and much more.
Here’s a look at the robotic revolution and how investors can invest in this space.
IDC forecasts that the worldwide spending on robotics systems and drones will be $115.7 billion in 2019 (robotic systems alone at $103.4 billion) and is expected to reach $210.3 billion by 2022. Another report estimates that the revenue in the global robotics market would touch $147.26 billion by the end of 2025, growing at a 17.4% CAGR between 2017-2015. While the projected numbers vary, they reflect the same trend.
The world robotics report shows that a new record high of 381,000 units of industrial robots were shipped globally in 2017 and is expected to reach about 630,000 units by 2021. The annual sales volume of industrial robots increased by 114% over the last five years (2013-2017). The sales value was at $16.2 billion in 2017 vis-à-vis 2016.
China, Japan, South Korea, the U.S. and Germany are the biggest market for industrial robots. Meanwhile, the sale of service robots increased by 85% during 2017 while there was a 39% increase in sales value. The service robots segment includes both professional (use in logistics, medical) and personal use robots.
While robotics is enhancing productivity and competitiveness, there is an uneasiness regarding its impact on the manual job market. Many reports and scholars have painted a dark picture on the rise of robotics. While some fears are justified, there is equal or more evidence to the contrary.
A report by IFR reads, “automation does not lead to job substitution, but rather to a reallocation of both jobs and tasks in which robots complement and augment human labor by performing routine or dangerous tasks.”
Further, an MIT technology review highlights how “humans and robots collaborating efficiently can be more productive than teams made of either humans or robots alone with a 85% reduction in human idle time.”
The use of robotics is said to be a great boon for manufacturing. In October 2018, a BCG report underlined that the U.S. urgently needs a more aggressive approach to developing and adopting robotic technologies for manufacturing, to increase its competitiveness and to boost its economy.
“Robotics will drive productivity enhancements, to compensate for a labor shortage and to counteract declining productivity growth. And a thriving domestic robotics industry will enhance America’s global competitiveness during a period of intensifying trade conflict,” read the report.
For those looking to invest in robotics, there are two broader options. The first is to invest in companies that make robots or its components; some of the companies operating in the field of robotics include, among others:
- iRobot (IRBT)
- Fanuc Corp (FANUY)
- Cognex (CGNX)
- ReWalk Robotics (RWLK)
- Rockwell Automation (ROK)
- CEVA, Inc. (CEVA)
- ABB Ltd.
- Seiko Epson Corp. ADR
- Alphabet, Inc. (GOOG, GOOGL)
- Northrop Grumman Corp (NOC)
- NVIDIA, Inc. (NVDA)
The second way is to invest via exchange traded funds (ETFs). ETFs provide a cost-efficient, transparent and convenient access to investing across companies and geographies. Here are some of the ETFs focused on robotics and artificial intelligence:
Launched in 2013, ROBO Global Robotics & Automation ETF (ROBO) was the first robotics and automation ETF providing investors access to rapidly evolving robotics, automation and AI companies across 14 nations. It has a portfolio of 94 companies with less than 20% allocation towards the top ten stock holdings which include FLIR Systems, Inc. (FLIR), Brooks Automation, Inc. (BRKS), Intuitive Surgical Inc. (ISRG), Aervironment, Inc. and FANUC Corp. The ETF has $1.36 billion as assets under management (AUM) and its geographical portfolio is weighted towards the U.S. and Japan.
The Global X Robotics & Artificial Intelligence ETF (BOTZ) launched in 2016 provides exposure to companies that potentially stand to benefit from increased adoption of robotics and artificial intelligence (AI) across industries. The ETF has $1.5 billion as assets under management and tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index. The top five stock holdings—Intuitive Surgical, Inc., Keyence Corp. (KYCCF), Mitsubishi Electric Corp., ABB Ltd, and Fanuc Corp (FANUY)—add to 36.13% while 60.13% of the portfolio is concentrated in the top ten stocks.
Next is the iShares Robotics and Artificial Intelligence ETF (IRBO). It tracks an index composed of developed and emerging market companies that could benefit from the long-term growth and innovation in robotics technologies and artificial intelligence. The ETF has the highest exposure to the U.S. and China in terms of geographical composition. Launched in 2018, the ETF has a portfolio of 97 holdings with 29.59 million as assets under management. The top ten stock holdings have a 15.05% allocation with Cloudera, Inc. (CLDR), Snap Inc Class A (SNAP), Lattice Semiconductor Corp (LSCC), iQIYI, Inc.(IQ) and Stratasys Ltd (SSYS) as the top five stocks.
Launched in 2018, First Trust NASDAQ Robotics and Artificial Intelligence ETF (ROBT) tracks the Nasdaq CTA Artificial Intelligence and Robotics Index which is composed of companies engaged in the artificial intelligence and robotics segment of the technology, industrial, medical and other economic sectors. The Index includes “companies in artificial intelligence or robotics that are classified as either enablers, engagers or enhancers.” The ETF has a geographical exposure is tilted towards the U.S. and Japan and has Xilinx, Inc. (XLNX), Ciena Corporation (CIEN), iRobot Corporation, ServiceNow, Inc. (NOW) as its top stock holdings. The top ten stocks have a 23.28% allocation.
Overall, the rise of robotics and artificial intelligence is revolutionizing multiple industries, and this is creating immense investing opportunities. The above listed ETFs are an efficient and convenient mechanism to investors to benefit from the shift that's underway.
ETF details based on factsheets. The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.