^{Building Wealth} Humanoids and the productivity shift

From thinking machines to working robots

Artificial Intelligence (AI) is no longer confined to software. A new phase is emerging where intelligence becomes physical and embedded in machines that can sense and move and act in real environments. This is known as embodied intelligence. Unlike traditional systems that process data in isolation, embodied intelligence allows machines to interact directly with the world. These systems combine perception, reasoning, and motion and enable robots to learn through experience and respond in real time.

This shift transforms AI from a digital tool into a workforce capability. It bridges the gap between thinking and doing. For investors, that is a powerful change.

Why humanoid robots are gaining traction

Humanoid robots sit at the centre of this transformation. Designed to resemble human form and movement, they can operate in environments built for people. They can walk through factories, lift objects in warehouses, and assist in service roles without needing major infrastructure changes. This adaptability sets them apart from traditional industrial machines. Instead of being confined to repetitive tasks, humanoids are evolving into general-purpose workers capable of handling multiple roles.

Current deployments remain simple, such as lifting and sorting and transporting goods. Yet rapid advances in AI models and robotics are expanding their capabilities at pace.

The productivity frontier: why this matters for the economy

Humanoid robots are often described as the next wave of automation. Some analysts refer to them as Automation 3.0, reflecting their ability to move beyond factories and into broader sectors.

The economic impact could be significant:

1. Productivity gains
   Robots can perform repetitive or physically demanding tasks efficiently
2. Labour shortage solutions
   Ageing populations and shifting job preferences are creating gaps in the workforce
3. Cost efficiency
   Automation can reduce operational expenses over time
4. Expanded output
   More work can be done without proportional increases in human labour

Research indicates humanoids could influence economic growth, labour markets and even inflation dynamics by lowering production costs and increasing supply.

This is why embodied intelligence is seen as a new productivity frontier not just a technological upgrade but a structural shift in how economies operate.

Exhibit 01: Demographic support is fading as dependency ratios rise

Sources: United Nations (UN) Department of Economic and Social Affairs, Population Division (2024). World Population Prospects: The 2024 Revision, custom data acquired via website, and ADCB Asset Management

Where humanoids are making an impact

Adoption remains early-stage, but real-world use cases are already taking shape across industries, with deployment expanding from controlled settings to broader applications.

Over time the transition from structured settings to more complex environments will define the pace of adoption.

Where value is emerging in humanoids

Interest in humanoid robotics is rising rapidly. Markets that are currently small are expected to expand significantly over the next decade. Estimates suggest the market could grow from a few billion dollars today to around two hundred billion dollars by 2035 reflecting strong demand growth.

The opportunity for investors goes well beyond robotics manufacturers:

• Hardware and components
  Sensors and motion control systems and batteries are critical to robot functionality.
• AI and software
  Embodied intelligence depends on advanced models that enable perception, reasoning, and learning.
• Semiconductors and infrastructure
  High-performance computing is essential for training and operating intelligent machines.
• Industrial and service adoption
  Companies that integrate robotics into operations may benefit from productivity gains.

Some investors are exploring diversified approaches including thematic funds given the early-stage nature of the sector and the limited number of pure-play listed companies today.

Key drivers behind growth

Several forces are converging to accelerate this trend:

• Advances in AI enabling robots to learn and adapt
• Falling hardware costs improving affordability over time
• Labour shortages across critical industries
• Increased investment from both private and public sectors

Large amounts of capital are flowing into embodied intelligence signalling growing confidence in its long-term potential.

Risks and considerations for investors

Despite strong momentum, this remains a developing theme with a range of inherent risks and considerations for investors. From a technological standpoint, robotics continues to face limitations in dexterity, reliability, and safety, particularly when operating in complex, real-world environments. Commercial viability is another key factor, as large-scale deployment will depend on the industry’s ability to achieve cost efficiency while demonstrating clear and measurable returns on investment.

At the same time, regulation and adoption pathways remain uncertain. The evolution of standards, safety frameworks, and broader public acceptance will significantly influence the pace at which robotics solutions are integrated into everyday use. Additionally, the competitive landscape is far from settled, with no clear consensus yet on which companies or regions will emerge as dominant players.

Importantly, the market itself is still in its early stages. Many current implementations remain in pilot phases rather than fully commercialised rollouts, suggesting that timelines for widespread adoption may vary and should be approached with measured expectations.

How to think about this trend as an investor

A disciplined approach can help navigate this emerging space.

1. Take a long-term view
   This is a structural theme that may unfold over years rather than months.
2. Diversify exposure
   Consider the full value chain, including hardware, software, and industrial adopters.
3. Focus on enablers
   Companies providing key technologies may benefit regardless of which robot makers succeed.
4. Monitor adoption milestones
   Watch for signs of scaling such as repeat commercial orders or cost reductions.
5. Stay balanced
   Growth potential is strong but expectations should be grounded in current realities.

Exhibit 02: Every layer of the humanoid value chain presents opportunities for investors

Sources: Asset Management

The long-term impact of embodied intelligence

Embodied intelligence marks a shift from digital intelligence to physical capability. Humanoid robots are not just another innovation. They represent a new way of delivering productivity across economies. The journey is still at an early stage. Many questions remain about timing, adoption, and commercial success. Yet, the direction is becoming clearer. AI is stepping into the real world, and with it comes a new frontier for productivity and growth and investment opportunity.