Investors have the opportunity to gain exposure to a potentially high growth robotics industry at its initial stages through a targeted exchange traded fund.
On the recent webcast, Investing in Artificial Intelligence and Automation Can Help Your ETF Portfolio, Wyatt Newman, Professor of Electrical Engineering & Computer Science Dept. at Case Western Reserve University, argued that investors should keep an eye on artificial intelligence and the robotics industry as it experiences exponential growth and transforms the various industries that incorporate robotics.
For example, Professor Newman pointed out that there are 253 million cars on U.S. roads and 95% of households own a car, and by 2020, self-driving cars could make up 10 million automobiles on the road.
The adoption of driver-less cars will part of the greater industrial revolution that society is now experiencing as the digital advancements drives interconnectivity between the physical and digital realms, producing so-called cyber-physical systems.
“The world is moving from an era of industrial automation to the use of advanced robotics and A.I. across the global economy,” Newman said.
Specifically, Newman believed that robotics could cause a number of anticipated impacts, including higher productivity, improved quality of life and shifting technological landscape. Artificial intelligence is expected to work across multiple industries, enhance human ability and improve capital efficiency.
Given the exponential growth rate of technology, William Studebaker, CIO and President of ROBO Global, the index provider of the ROBO Global Robotics & Automation Index ETF (NasdaqGM: ROBO), expects the cycle to quickly accelerate ahead, resulting in a shift from a corporate competitive advantage to automate or risk being left behind. The world already spends about $64 billion annually on robotics and related services, and spending is expected to surge to $1.2 trillion by 2025 as more industries improve efficiency through automation and robotics.
Investors interested in the potentially explosive growth rate of the robotics industry should keep in mind that the universe of robotics may be divided into various smaller segments. Studebaker, though, simplified the investment landscape with two distinct categories: technology and applications. Technology includes companies with products an services that enable robots to “think, sense and act,” whereas applications include companies that deploy robotic and automation technology into a product, service or manufacturing process.
ETF investors can also gain diversified exposure to the space through the ROBO Global Robotics & Automation Index ETF (NasdaqGM: ROBO), which provides exposure to global companies engaged in the business of robotics-related or automation-related industries. The underlying index starts off with a global database of 1,000 companies, classifies components based on a proprietary classification system with 13 subsectors, looks for a minimum threshold for percentage of robotics and automation revenue, and selects those best positioned as market and growth leaders.
ROBO’s portfolio includes a 60% tilt toward non-bellwether robotics with growing revenue contributions and a 40% tilt toward bellwether robotics companies that are well-established in the space.
The robotics ETF’s portfolio may also provide exposure to companies with sustainable growth opportunities, as the underlying ROBO Global Robotics & Automation Index has exhibited attractive sales growth, EBITDA growth and earnings-per-share growth. The underlying index has even outperformed the broader technology and S&P 500 index since the 2008 financial downturn.
Financial advisors who want to learn more about the robotics and automation industry can watch the webcast here on demand.