Exchange traded fund investors should future-proof portfolios with disruptive technologies.
On the recent webcast, Behind the Machines: Investing in Robotics from a Research Perspective, Jeremie Capron, Director of Research for ROBO Global, said that the robotics and artificial intelligence industry is set on an exponential growth path.
Expensive industrial robots were first introduced exclusively to auto manufacturers in the 1960s, and by today, the robotics, automation and artificial intelligence industry has grown to over $200 billion. As automation costs decline and technology advances, applications for robotics and artificial intelligence have expanded, helping improve productivity across a range of industries. Looking ahead, the robotics, automation and artificial intelligence segment could grow to over $1 trillion by 2035.
Robotics and artificial intelligence has been a transformational technology. The declining costs in technology has driven increased robotics investments. Meanwhile, big data has fueled growth in artificial intelligence. The advancements touched upon many industries, helping improve areas like logistics automation, e-commerce growth and healthcare, among others.
Looking ahead, Capron pointed to a number of factors that may continue to support the entire robotics and artificial intelligence supply chain and drive long-term growth potential, including the low penetration of robotics, ongoing technological advances, potential social benefits and shifting demographics.
Lisa Chai, Senior Research Analyst for ROBO Global, also pointed out that the expansion in the robotics and A.I. industries are being reflected by real earnings growth. The transformational technologies are in high demand and advances are helping reducing cost in the supply chain. Consequently, the industry is experiencing fast earnings growth trajectories, with 20% or more earnings per share growth, double-digit sales growth and five consecutive quarters of beats.
Chai also highlighted some of the more standout players that have been adopting and pioneering the new technologies. For example, Nvidia Corp. (NasdaqGS: NVDA) has revolutionized computing and powered A.I. with the industry leading GPU platform. The tech company has the largest market share in gaming and datacenters, producing A.I. or machine learning training for autonomous cars, blockchain and high performance computing.
Intuitive Surgical (NasdaqGS: ISRG) is also a surgical robotics pioneer and leader in the healthcare field. The company has installed base of 4,000+ DaVinci systems that covered over 800,000 procedures in 2017. The firm has enjoyed recurring sales of 70% and boasts a strong balance sheet to fund further research and development efforts and sales expansions.
Teradyne (NasdaqGS: TER) is a global leader in electronic test equipment pivoting to robotics. The company is a market leader in collaborative robotics and has acquired Universal Robots and Mobile Industrial Robots to expand its market share.
As a way to capture these innovative and quickly growing companies, investors may turn to something like the ROBO Global Robotics & Automation Index ETF (NYSEArca: ROBO), the original ETF dedicated to robotics investing. The fund is backed by an expert team with an exclusive focus on robotics and is uniquely positioned to access, understand and track the robotics and automation ecosystem.
ROBO includes global exposure with its largest tilt toward U.S. 42%, followed by Japan 26%, Germany 9%, Taiwan 5% and Switzerland 5%. The ETF includes companies that touch upon various market industries, including 18% computing and A.I., 15% manufacturing, 13% actuation, 10% healthcare and 10% sensing.
Due to its cross-market exposure, the fund is relatively diversified compared to traditional cap-weighted indices. Specifically, ROBO only has a 2.37% overlap with the S&P 500 Index and a 1.33% overlap with the MSCI World Index.
“Robotics and automation is positioned to outperform the global market and is becoming increasingly visible in every aspect of our daily and business lives,” Capron said.
Financial advisors who are interested in learning more about robotics investments can watch the webcast here on demand.