rewrite this title Where Have All the Good Robot Stocks Gone? – Nanalyze

Imagine the sorts of things you might do with unlimited human capital. That’s how the Great Pyramids were built, in the great country of Africa. Across the pond too, someone had to climb the hills of Machu Pichu and put all those rocks into place. Imagine if you commanded a swarm of humanoid robots to build another great wonder of the world, only much grander. That’s probably something the Saudis are thinking about as they scramble to remove the curse of oil.

Mastery of humanoid robots promises to usher in an era of unimaginable prosperity. Robots do all the work while humans sit around popping pills and playing video games. Ah, the golden ages. So why not get rich during the process by investing in robotics?

The Evolution of Robotics

Many the investment thesis sounds compelling on the tin but fails to deliver appropriate returns for retail investors despite the technology being a resounding success. (Solar anyone?) Just because the robotics value proposition is intuitive, it doesn’t mean you’ll make loads of money from it. It all comes down to the stocks we have to select from. And over the years, that universe has grown and evolved as quickly as the underlying technologies. Today, we’re going to revisit ten robot stocks in the Nanalyze Disruptive Tech Stock Catalog and probably reclassify about half of them.

From Industrial Robots to Humanoids

When it comes to investing in robots, the most appealing thesis has changed over the years as various technologies traverse the Gartner Hype cycle. On the plateau of productivity you’ll find industrial robots which probably built whatever device you’re using to read this. We spent a lot of time scouring the globe for industrial robot stocks and came up with Chinese and Japanese players. The best of the lot seemed to be Fanuc (6954 T), but lately they haven’t been growing the only segment we care about – industrial robotics – and perhaps that’s because this represents a more mature space.

Looking at Fanuc’s robotics annual revenues we see they had one year with mid single-digit growth followed by a year with double-digit negative growth.

While the quarterly numbers hint at a possible reversal, we already had qualms about holding this position back in July 2024 when we said, “we still like Fanuc for the pure-play exposure to robotics – at least until something better comes along.” So, Fanuc is somewhat of a placeholder, and we decided that we’re no longer going to hold placeholders. Fanuc’s overall business isn’t seeing growth, and we’re not going to sit around waiting for robotics to turn around after two disappointing years. Maybe it’s time to exit.

The real emerging opportunity right now is humanoid robots, but that thesis is on Gartner’s “innovation trigger” phase. In other words, it’s not yet investable for retail investors. And we can’t help but wonder the extent to which humanoids will disrupt even the most advanced technological accomplishments. Will a humanoid be able to drive a car better than a human? If so, there’s your vehicle autonomy thesis solved. Could a humanoid robot perform surgeries as skillfully as its non-human looking counterpart? Will robotic surgeries ever move from a clunky octopus-looking platform to a human form?

Robots in Healthcare

In the United States, robotic surgery accounts for about 22% of all surgical procedures and rising. Surgical robots have even started doing heart surgeries. It’s estimated that 90% of minimally invasive operations will be robot assisted by 2035. That’s why we took a position in Intuitive Surgical (ISRG) after it finally fell below our target simple valuation ratio (SVR) of 18 (we won’t invest in a company with an SVR of three times our catalog average which is around six). Now there’s talk about other firms deploying competing solutions which is a good thing. In the case of Medtronic (MDT), it’s a company we’re also holding as part of our dividend growth strategy, Quantigence. Along with numerous private companies brining robotic surgery solutions to market there’s also another firm we like – PROCEPT BioRobotics (PRCT) – which we wrote about recently here. Emerging competition shows there are lots of opportunities remaining in a lucrative space.

Another healthcare robotics name we’ve liked for a while is Omnicell (OMCL), a company that’s building an automated platform so that pharmacies can dispense pills to the Americans quicker. While the thesis has always sounded good on paper, they’re just not growing revenues. You cannot have stalled revenue growth for two years in a row and claim you’re disrupting. So we’re changing them from a “like” in our catalog to an “avoid” along with Tecan Group (TECN SW) which is also on their third year of stalled growth. We liked Tecan for their laboratory automation exposure, but if that’s what you’re looking for, then why not choose a much larger life sciences hardware player? For example, Thermo Fisher (TMO), though they’ve also seen revenue growth stall lately. Word on the streets has been that life sciences capital expenditures have been muted lately in the face of (wait for it) strong macroeconomic headwinds.

Another stock that’s also feeling these headwinds is warehouse robotics leader AutoStore (AUTO OL).

Warehouse Robotics

In 2023, we said “The company believes it can sustain a 40% CAGR over the next few years as it tries to capture a warehouse automation market projected to reach $360 billion by 2026.” That’s not happening. Quarterly revenues show that growth has flatlined and is more recently declining, something they blame on the implementation of their “warehouse-as-a-service” solution which they’ve been talking about for years.

The market for AutoStore’s AS/RS warehouse solutions seems to be growing strongly, as we pointed out in our last article on the topic. So, it’s just AutoStore that’s not growing. We pointed out that Ocado (OCDO L) is still growing in their “Technology solutions” segment, so this points to a company specific problem. Lack of execution perhaps? As we always say, solutions that save money should still be seeing growth in uncertain times, and AutoStore is not. The new business model might give them some recurring revenue, but we don’t seem to have a timeline for when that will be fully implemented such that growth returns to what it used to be. It’s similar to our recent 10x Genomics situation. Growth has dried up and we’re not told when it will return. Probably time to exit and keep an eye on what Ocado gets up to. Symbotic (SYM) still has too strong a dependency on Walmart.

Vehicle Autonomy

All eyes are on vehicle autonomy and humanoids as two trillion-dollar opportunities that robotics investors want a piece of. That’s where our focus will be. In the autonomy arena you have pick-and-shovel hardware plays like Mobileye (MBLY) and computer vision, or the motley crew of LiDAR stocks that largely decimated shareholder value as soon as the SPAC signatures dried.

One computer vision stock in our catalog that’s listed as a “like” is Cognex (CGNX), a firm that we haven’t revisited for a while. The bull thesis was their diversified application of computer vision across a plethora of applications including automotive and industrials. The latest investor deck talks about a “mixed macro backdrop” which implies that their various segments often work to offset one another (Trimble vibes.)

While we love this sort of internal diversification for value stocks, it’s not so good for growth stocks which we expect to be growing. Cognex saw revenues peak in 2021 at around $1.04 billion and they haven’t exceeded that number since. Their investor deck keeps referring to a “cycle” they’re expecting where growth will return to double digits, so we’ll see if this year exhibits any strength. In the meantime, seems like they’re probably more of an “avoid” than a “like.” If you’re looking for a leader in computer vision, why not just invest in Mobileye, though they’re also going through some growing pains.

Then you have companies working on autonomous vehicles to transport people like Tesla, BYD, and Google with their Waymo venture. Watching closely on the sidelines would be Uber which also provides some exposure to autonomy provided they’re the dominant software for transportation. And don’t forget about the autonomous trucking opportunity which is still being pursued by survivors like Aurora Innovation (AUR).

Consumer Robotics

This segment merits a mention only because we have iRobot (IRBT) listed as a “like” in our catalog. This looked like a genius move when Amazon went to acquire them, but once that fell through, the entire business imploded for some reason. Gross margins have breached the single digits while this $100 million company desperately tries to stay out of bankruptcy court as Chinese substitute offerings continue to gobble up market share. Definitely an avoid now.

Our Robotics Portfolio

The writing is on the wall. As much as we love cute Japanese robots and cobots, Fanuc is no longer growing their robotics business. The same holds true for AutoStore which seems to be squandering the grand opportunity in front of them. You can’t talk about “warehouse robotics as a service” and then sweep the idea under the carpet, or say that’s what you’re doing as revenues plummet.

Going forward, we’ll be leaving industrial robotics behind and watching the emergence of humanoid robots closely. Autonomy is anyone’s game, but we’re due for a check in with the autonomous trucking thesis. As for eVTOLs, the “build it and they will come” story doesn’t work. We need to see some traction, and we’ll revisit the main players this Fall.

Lastly, it’s worth mentioning that agentic AI isn’t in the scope of today’s discussion on robotics. While NVIDIA’s charismatic CEO places it alongside autonomy and humanoids as the three grand AI-enabled opportunities in front of us, software – important as it is – belongs in our “enterprise AI” classification.

Conclusion

Robotics is a tricky investment thesis that ETF providers often meld with artificial intelligence. These days, anyone working on robotics solutions will be employing AI. You cannot be disrupting with robotics and not have revenue growth. Either the opportunity isn’t as large as you say it is, or your competitors are eating your lunch while you fail to execute. After today’s portfolio adjustments we’ll be holding and liking fewer robotics stocks as we search for better pure-play ways to get exposure to humanoids and autonomous driving.