How to Invest in Robotics

How large is the robotics market?

According to Market Research Future, the global robotics market is expected to grow at a compound annual growth rate (CAGR) of 22.8 percent from 2021 to 2030 to reach US$214.68 billion. Growth will be tied to the adoption of artificial intelligence (AI) and robotics technologies across industries like defense and security, manufacturing, electronics, automotive and healthcare.

Research firm Markets and Markets projects that the industrial segment of the robotics market alone will grow at a CAGR of 14.3 percent from 2022 to 2027 to reach a value of US$30.8 billion. The outlet predicts that the robotics market will play a key role in the coming age of automation, with smart factories increasing demand for robots — in fact, robots are already making their way into consumer goods manufacturing, food processing and packaging and ecommerce supply chain automation.

Demand for industrial robots is also rising in the medical field, including surgical robotics. Grand View Research projects that this segment of the robotics market will experience a CAGR of 19.3 percent from 2022 to 2030 to reach US$18.2 billion.

Aside from that, the automotive industry has long been a sector where industrial robotics has played a hugely transformative role. In 2020, auto manufacturer BMW (ETR:BMW) signed a supply agreement with robotics firm KUKA (OTC Pink:KUKAF,ETR:KU2) for 5,000 robots to help manufacture BMW's current and future vehicle models.

In late 2021, Nissan (OTC Pink:NSANY,TSE:7201) announced its Intelligent Factory initiative, which will harness AI, the internet of things and robotics technology for vehicle manufacturing to create a zero-emissions production system.

Other major automakers with industrial robots working on their factory floors include Ford (NYSE:F), General Motors (NYSE:GM) and Mercedes-Benz (ETR:MGB).

How to invest in robotics stocks?

For investors looking to enter this emerging tech sector, robotics stocks may be a good place to start.

Stocks are generally the more popular route to take when it comes to investment opportunities, and there's certainly no shortage of robotics stocks to choose from. Major companies in the robotics sector include:

• Cognex (NASDAQ:CGNX): Cognex provides machine-vision products that obtain and analyze visual data in order to automate robotic tasks where vision is needed. Cognex also offers machine-vision technologies that are used to automate the manufacturing and tracking of items such as mobile phones, medications and automobile tires.

• iRobot (NASDAQ:IRBT): iRobot is a consumer robot company that designs and builds robots. Its portfolio includes concepts in mapping, navigation, mobility and AI. The company is also famously known for creating the Roomba, a floor-vacuuming robot.

• ABB (NYSE:ABB): ABB is a leading power and automation technology company with a robotics and discrete automation division that offers machine and factory automation solutions, as well as a suite of wide-ranging robotics solutions and applications. The company's new robotics manufacturing and research facility in China opened in December 2022.

• Rewalk Robotics (NASDAQ:RWLK): Rewalk Robotics is a medical device company. It works to design, develop and commercialize exoskeletons that offer people with mobility impairments the ability to stand and walk.

• Rockwell Automation (NYSE:ROK): This company provides industrial automation power, control and information solutions through two segments: architecture and software, and control products and solutions.

How to invest in robotics ETFs?

For investors who would rather put their money into the robotics sector as a whole as opposed to a single company, exchange-traded funds (ETFs) may be the way to go. There are a handful of robotics ETFs for investors to choose from, and they track a variety of companies in the industry. Here are three examples to consider:

• Robo Global Robotics & Automation ETF (ARCA:ROBO): This ETF was the first robotics ETF to launch, with an inception date of October 22, 2013. It tracks 80 companies involved in the robotics and automation industries; to be included, companies must receive a portion of their revenue from robotics and automation products, processes, services or devices. Its top holdings include Intuitive Surgical (NASDAQ:ISRG) and Cognex.

• Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ):ETF.com states that this Global X ETF, which was launched on September 12, 2016, provides cross-sector exposure to companies that are working on developing and producing robotics and AI solutions. To be considered for the ETF, companies must earn a large portion of their revenue from robotics or AI. NVIDIA (NASDAQ:NVDA) and ABB are among its top-weighted holdings.

• First Trust NASDAQ Artificial Intelligence & Robotics ETF (NASDAQ:ROBT): Since 2018, this robotics ETF has tracked the performance of companies involved in AI, robotics and automation. The ETF's top holding include AeroVironment (NASDAQ:AVAV) and Illumina (NASDAQ:ILMN).

In summary, the robotics industry isn't going anywhere anytime soon and it looks to have a wealth of investment heading its way. It seems likely to be an attractive space for investors for many years.

Why invest in robots?

Recent research from Blackrock highlights the combination of technological breakthroughs, new applications, economic forces and demographic shifts that are creating an ideal investment landscape for robotics.

“Wage inflation, labor shortages, demographic trends and supply chain transformation are game-changing catalysts that may accelerate demand for years to come,” states the report.

Who are the "big four" in robotics?

The "big four" in the robotics industry are:

• FANUC (TSE:6954), a privately owned Japanese firm and a pioneer in industrial robot and factory automation.

• KUKA, a German industrial robot and systems company and a subsidiary of Midea Group (SZSE:000333).

• ABB (OTC Pink:ABLZF,SWX:ABBN), a Swedish-Swiss multinational company that offers a suite of robotics products and has a new China-based manufacturing facility.

• Yaskawa Electric (TSE:6506), a Japanese manufacturer of low- and medium-voltage variable frequency drives, servo systems, machine controllers and industrial robots.