Looking to Make a Fortune Investing in Robotics?

Backstory to investing
If you’ve been scouring the markets looking to spy an IPO in robotics akin to Intuitive Surgical’s (NASDAQ:ISRG) launch at $9 bucks a share that now trades for over a grand, forget it. That was back in 2000 when the millennium was new and fresh, when a robot’s primary occupation was making autos and trucks, when anything and everything seemed possible.

Here in 2017, with nearly two decades of grumbling over the whereabouts of another Intuitive-type champion that could quickly make a boatload of money,  many have given up in frustration but still keep half an eye peeled hoping to spot another winner.

Maybe soon, maybe next quarter, maybe next year—when? Someone’s making money on robots, why can’t it be spread around more, is a frequent lament. Waiting for another killing in the market has been a bit like waiting for Godot.

To the chagrin of many, we now know that robotics is high tech, but it isn’t IT. It’s not dump the cash in for fast growth and quick returns; robotics is hardware, software, mechatronics, and systems engineering all rolled up into incredibly complex machines that take more time to build and perfect than investors are willing to give them.

Well, 2018 may well be the year Godot finally arrives for an extended stay. Robotics, already experiencing an investment-friendly binge, is readying for much more, which should be good news for those who have been saving up for the big event.

Three significant, converging factors have created this inviting investment climate:

1. Robot technology has advanced such that robots are now skilled enough to work in places other than auto plants. In addition to manufacturing, these technological advances are disrupting every industry and vertical from agriculture to healthcare, pharmaceuticals, energy, and logistics, security, and transportation, among the many others.

Machine vision, GPUs, laser sensors, haptics, edge computing, the Cloud, Big Data, predictive analytics…and the latest guardian of the galaxy, AI (artificial intelligence) in all its forms and abilities, are the tech advances driving deployments of industrial robots…and cobots.

Wyatt Newman, robotics researcher from Case Western, touts AI as the sweet spot of automation. “We’re seeing a dramatic change in AI capability, he says. “When you give robots better brains, what you’re doing is allowing your AI to have physical effects on the world, whether that’s transporting you from A to B, or fulfillment, or it’s doing farming, manufacturing, security, the brain and the machine are making the difference. That revolution is really spurring things on.”

2. Significantly, more robots doing more things in more places has meant that their popularity and numbers have increased such that there are way more of them.Sales are fantastic beams the International Federation of Robotics in one communique after another almost daily.  Such a profusion of the machines has driven down prices.

A PwC analysis found that “offshoring jobs could save a firm approximately 65% on labor costs while replacing workers with robots can achieve an estimated 90% in savings,” which is sure to drive the sale of robots and automation machinery ever higher.

ARK Investment Management produced the chart below: Industrial Robot Cost Decline. And here’s their take on that decline: “According to ARK’s research, industrial robot costs will drop by roughly 65%, to levels much lower than most analysts now anticipate, by 2025. Combined with advances in machine learning and computer vision, this drop in costs should cause an inflection point in the demand for robots as they infiltrate new industries with more provocative use cases.” 

3. Industrial robots are high-quality, productive workers;  humans can’t match their output.  Because of these steel-collar workers and their peerless output—around the clock if necessary!—productivity gets a boast. Factory owners like the increase in productivity, low price and ROI of these workers, so they are buying ever more.

Such mass productivity affects GDP. Georg Graetz of Uppsala University and Guy Michaels of the London School of Economics in their Robots at Work “found that, on average…the increasing use of industrial robots over the time period raised the annual growth of GDP by 0.37%. They compared this substantial growth to the boosts in productivity that occurred at the turn of the 20th century from steam technology.” The comparison was near identical.

What’s not to like?  All of this new technology, new applications, more deployments, and lower prices have raised up a virtuous circle benefitting everyone. Best of all, now that this troika has converged and is in place, look for rapid innovation to take over and to accelerate further advances.

The net-net is that the robotics ecosystem is burgeoning and the investment opportunities are multiplying rapidly across a broad front.

Will an Intuitive-like, dream-buy arise? Probably not. These days, great robotics tech doesn’t last too long before it is scouted out and scooped up by a deep-pocketed tech giant. Universal Robots was one that would have made for a powerfully rich IPO but was acquired by Teradyne for $285 million. Look for more of the latter than the former as convergence intensifies.

Manufacturing is on the leading edge of this convergence. Our multi-part seriesWelcome to Intelligent Manufacturing 2018 takes a deep dive into what’s ahead for both robots, robot parts, and automation.

In the meantime, the half eye peeled for a robotics winner is suddenly bulging in glee at what robotics is now offering up.