Digital Economy Series: Robotics & Humanoids – AI’s upcoming playing field

How advance are current humanoid? Today’s humanoid robots have progressed well beyond laboratory prototypes but remain in the early stages of real-world usefulness. They can walk, balance, navigate human environments, and perform basic tasks such as stacking, carrying, or simple assembly. More advanced models, such as Figure AI’s Figure 02 and 03, are equipped with multiple sensors, cameras, onboard AI systems, and dexterous hands capable of precise object manipulation.

The rapid acceleration in humanoid development is driven by three key factors:

1)       AI advancement. Recent progress has shifted development focus from the “body” to the “brain.” While 2025 emphasised improvements in physical capabilities—such as folding clothes, boxing, or delicately holding fragile objects— industry focus is increasingly shifting toward cognitive capabilities, including task decomposition, environmental understanding, model inference, and human interaction. Software-defined, modular systems now enable rapid reconfiguration and reduce integration risks, supporting mass customisation. NVIDIA’s launch of NVIDIA Cosmos™, a platform of generative world foundation models, allows developers to generate large volumes of photorealistic, physics-based synthetic data, significantly shortening training and testing cycles.

2)       The increased in Degrees of Freedom (DOF) - DOF measures how many independent joint movements a robot can perform and correlates with dexterity and flexibility. Tesla’s Optimus currently leads with an estimated 40+ total DOF, including 22 in the hands and multiple joints across the arms and body. This compares with approximately 28 DOF in human hands. Figure AI follows with roughly 16 DOF per hand, in addition to joints across the limbs.

3)       Declining bill of materials (BoM) cost. While mass production of fully autonomous humanoids capable of operating across environments may still take several years, we expect BoM costs to decline by more than 50% over the next five years. This is driven by economies of scale and improved component design, particularly if the majority of components are manufactured in China.

Figure 3: BOM cost set to decline over the years

Source: BofA Global Research estimates

The market potential is substantial. Some industry estimates suggest humanoids could automate a meaningful share of industrial labour roles by the mid-2030s, translating into nearly USD 5 trillion in economic value.

Pilot deployments, such as Agility Robotics’ Digit and Figure AI’s humanoids, are already underway in logistics and manufacturing. Recently, Tesla CEO Elon Musk indicated that Optimus robots may be sold to the public by the end of 2027, potentially accelerating investment interest. While truly general-purpose humanoids may still be years away, a more realistic path involves deploying robots with limited capabilities initially and gradually expanding functionality over time.

Figure 4: Total units in ownership could reach 3 billion by 2060E

Source: BofA Global Research estimates

China – A rising structural leader in robotics supply chain

Background: China, once defined primarily as a manufacturing powerhouse, is gradually transitioning toward developed-nation status and now faces demographic challenges similar to other advanced economies. As of end-2024, approximately 22% of China’s population was aged 60 or above. This ageing trend, combined with rising tertiary education levels that reduce the supply of low-skill factory labour, exacerbates labour shortages.

To maintain global manufacturing competitiveness and address these structural challenges, the Chinese government has prioritised domestic technology innovation and self-sufficiency. This policy direction has supported investor interest in domestic robotics-related equities.

Although China’s humanoid robotics industry remains at an early stage, we see significant long-term potential driven by:

(i) technology self-sufficiency as a core national strategy over the next five years; and

(ii) a comprehensive manufacturing supply chain that provides a competitive advantage in producing humanoid hardware components such as motors, reducers, and roller screws.

China is already the world’s largest exporter of service robots, and as humanoid manufacturers seek to reduce BoM costs, Chinese component suppliers are likely to gain global market share.

Figure 5: Top 10 countries for service robot suppliers (‘000 units)

Still Challenges to overcome

At current levels, humanoid robot companies still need to overcome a series of key bottlenecks, including:

1)       Cost. Although component commoditisation and open-source development are lowering barriers to entry, humanoids require advanced AI chips and processors, keeping costs higher than traditional industrial robots. This cost gap is likely to persist in the near term, even as prices gradually decline.

2)       Trustworthy AI and safety. The smallest error rates can have cascading effects in physical systems, potentially leading to production waste, product defects, equipment damage, or safety incidents. AI model errors or hallucinations could be perpetuated and amplified across entire production runs, creating compounding downstream effects on costs and operations.

AI-powered machines can behave unpredictably even after extensive safety testing. The stakes rise significantly in public spaces, where autonomous systems must navigate unpredictable human behavior. To scale physical AI systems across various industries, comprehensive safety strategies that integrate regulatory compliance, risk assessments, and continuous monitoring are necessary.

Future opportunities for robotics

1.       Quantum robotics— the integration of quantum computing with AI-powered robotics—remains at a very early stage but holds long-term promise. Quantum algorithms could significantly enhance processing speed, navigation, decision-making, and fleet coordination, while quantum sensors may improve perception and interaction.

2.       Longer-term upside may emerge from consumer applications. Applications could include elderly and disability care, cleaning, meal preparation, and household maintenance. With humanoid material costs expected to fall from approximately USD 35,000 in 2025 to around USD 13,000 over the next decade—and manufacturing costs already declining sharply between 2023 and 2024—mass production is becoming increasingly feasible.

ETF Idea: Global X Robotics & Artificial Intelligence ETF and Global X China Robotics and AI ETF

Given the early-stage nature of humanoid adoption and uncertainty around ultimate winners, diversified exposure through thematic ETFs may provide more balanced access to the theme.

Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ)

The ETF tracks the underlying index Indxx Global Robotics & Artificial Intelligence Thematic Index, which is designed to invest in companies that are expected to benefit from the increased adoption and utilization of robotics and Artificial Intelligence (“AI”), including companies involved in the development and production of:

– Industrial Robots and Automation: robots and robotic automation products and services, with a focus on industrial applications.

– Unmanned Vehicles and Drones: unmanned vehicles (including hardware and software for autonomous cars), drones and robots for both military and consumer markets.

– Non-industrial Robotics: robots and AI that are used for non-industrial applications, including but not limited to agriculture, health care, consumer applications and entertainment.

– Artificial Intelligence: applications, technologies and products that utilize Artificial Intelligence for data analysis, predictive analytics, task automation and other applications.

Companies that derive a significant portion (50% or greater) of their revenues from the above industries/segments or that demonstrate the above industries/segments to be a primary business focus are eligible for inclusion in the index.

Table 2: Top 10 companies within the ETF

Company	Wgt (%)	How It Relates to Robotics / Humanoids
NVIDIA Corp	10.89%	Core AI and robotics computing platform provider. Supplies GPUs, AI accelerators, and software stacks (CUDA, Isaac, Omniverse) used to train, simulate, and control robots and humanoids. Critical for vision, autonomy, and AI “brains.”
FANUC Corp	9.13%	Industrial robotics leader. Produces factory robots (arms, CNC automation).
ABB Ltd	8.80%	Robotics and automation systems provider. Strong in industrial robots, motion control, drives, and power electronics.
Intuitive Surgical Inc	6.24%	Medical robotics pioneer. Creator of the da Vinci surgical robot. Highly advanced in robotic precision, control, and human-machine interfaces, which inform future humanoid dexterity concepts.
Keyence Corp	5.85%	Sensors, vision systems, and automation components. Supplies machine vision, laser sensors, and inspection systems that are essential “eyes and nerves” for robots, including humanoids.
Daifuku Co Ltd	4.59%	Material handling and warehouse automation specialist. Develops automated logistics systems and robotic handling solutions. Active in smart factories and automated environments.
SMC Corp	3.87%	Actuators and motion components supplier. Major producer of pneumatic and electric actuators, valves, and control systems—core physical components used in many robots (including humanoid joints and grippers).
Yaskawa Electric Corp	3%	Motion control and industrial robot manufacturer. Known for servo motors, drives, and robotic arms. These motion technologies are foundational for humanoid joint control and coordination.
AeroVironment Inc	2.99%	Autonomous systems and robotics for defense. Specializes in drones and unmanned systems rather than humanoids.
Pegasystems inc	2.98%	AI decisioning and automation software. Contributes at the software layer (process automation, AI decision logic) that could integrate with robotic workflows and autonomy systems.

Global X China Robotics and AI ETF (HKEX: 2807)

The ETF is designed to track the performance of the underlying index, FactSet China Robotics and Artificial Intelligence Index, which invests in companies either headquartered or incorporated in Mainland China and Hong Kong which focus on productising and developing hardware and software products with the ability to perform tasks with a high level of precision and automation.  The Index seeks to capture main players throughout the robotics and artificial intelligence value chain, including industrial automation machineries, artificial intelligence software, and robotics line makers.  Companies are categorised into two themes:

(i) industrial automation machineries and robotics makers

(ii) artificial intelligence software.

Table 3: Top 10 companies within the ETF

Company	Wgt(%)	Link to Robotics / Humanoids
Baidu Inc. (ADR)	8.8%	AI algorithms, large language models, perception & autonomy software used in robots and humanoids
iFLYTEK	7.8%	Speech recognition, natural language interaction for service robots and humanoids
Beijing Kingsoft Office	7.4%	Minimal direct robotics relevance; possible AI software spillover
SUPCON Technology	7.4%	Industrial automation, process control systems used alongside robots in smart factories
SenseTime Group	6.9%	Visual perception for robots, humanoids, autonomous systems
Hangzhou Hikvision Digital	6.9%	Machine vision, sensors used in robotics and autonomous systems
Shenzhen Inovance Technology	6.2%	Servo motors, motion controllers — core components of robots & humanoids
Zhejiang Dahua Technology	5.6%	Vision sensors and AI analytics used in autonomous & robotic systems
Horizon Robotics	5.2%	AI processors for robotics, autonomous machines, embodied intelligence
Han’s Laser Technology	4.4%	Precision manufacturing equipment used to produce robot & humanoid components
Source: Mirae Asset, Bloomberg Finance L.P., iFAST, iFAST compilations. Data as of 29 January 2026.

Conclusion

Robotics (particularly humanoids) remains early-stage, but advances in AI capability and declining hardware costs are improving commercial viability. Automation, historically concentrated in manufacturing, is now expanding across a broader range of industries, enhancing productivity, precision, and scalability. As humanoid and autonomous systems continue to evolve, they are increasingly bridging the gap between industrial efficiency and human adaptability. Over time, these systems are likely to contribute meaningfully to productivity gains across manufacturing, services, and eventually, household environments.

That said, the humanoid theme remains nascent, with mass production and broad commercial deployment still several years away. As such, while the long-term opportunity is compelling, near-term outcomes are likely to remain uneven and highly sensitive to technological execution, cost curves, and regulatory developments.

Investors should adopt a selective and measured approach, recognising that adoption will likely be gradual and uneven.

Table 4: Valuation for Global X Robotics & Artificial Intelligence ETF (Indxx Global Robotics & Artificial Intelligence Thematic Index)

	2025	2026EST	2027EST	2028EST
Revenue	1,177.73	1,306.94	1,449.62	1,532.27
Revenue Growth (%)	-1.78	10.97	10.92	5.7
Earnings	130.7	179.96	216.93	262.47
Earnings Growth (%)	-9.11	37.68	20.54	20.99
P/E	45.69	33.59	27.86	23.03
Fair P/E				35
Upside Potential (%)				52%
Target Price				56

Table 5: Valuation for Global X China Robotics and AI ETF (FactSet China Robotics and Artificial Intelligence Index)

HKD	2025	2026EST	2027EST	2028EST
Revenue	27.3	34.25	39.17	42.67
Revenue Growth (%)	-14.94	25.47	14.35	8.95
Earnings	2.37	3.35	4.35	5.03
Earnings Growth (%)	-37.46	41.74	29.86	15.5
P/E	53.37	40.43	31.13	26.95
Fair P/E				39
Upside Potential (%)				45%
Target Price				94

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.