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NEXT PIT STOP: PHYSICAL AI

Artificial intelligence is moving beyond data centers into the physical world—a shift Citigroup calls “physical AI.” This transition means AI is now embedded in products, robots, and factory systems, enabling smarter automation and greater efficiency.

The brokerage says AI-driven edge devices, including robotics, are set for strong double-digit growth, with design software boosted by generative design. Physical AI could lift annual capex by mid-single digits as automation replaces labor.

Citigroup estimates automation will soon handle 20%–40% of tasks in robotics and autonomous vehicles. If robots take on 30% of manufacturing jobs within a decade, the global robot base could jump from 4 million to nearly 30 million units. This shift will redirect spending from labor to capital investment, delivering 30%–40% labor cost savings and 6%–16% productivity gains.

Leading candidates like Siemens SIEGn.DE, Rockwell ROK.N, and Honeywell HON.O are already using AI for quality control, cybersecurity, and process optimization. The brokerage believes the next wave will feature a combination of agentic intelligence and digital twins—promising even deeper transformation.

Warehouse automation is advancing too, with China leading mobile robot shipments through companies like UBTECH Robotics 9880.HK and Hengli Hydraulic 601100.SS.

Citigroup projects the global automation market will grow from $65 billion in 2024 to $112 billion by 2029, driven by autonomous mobile robots (AMRs).

According to Citigroup, investment in physical AI has surged from $2.5 billion in 2020 to over $8 billion in 2025. Since 2013, 24 private firms including Figure AI now exceed $1 billion valuations, as industrials are looking at automation as a core strategy.

Despite high upfront costs, models like Robotics-as-a-Service (RaaS) and workforce upskilling are easing adoption. As investment accelerates, winners will be those who master software integration, partnerships, and flexible, intelligent automation.

(Kanishka Ajmera)

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