The rise of what’s being dubbed “physical artificial intelligence” is catching the attention of investors as the next big wave in the AI investment landscape. This new frontier is opening doors for robotics manufacturers, auto suppliers, and specialized semiconductor companies. After seeing substantial gains in stocks like Nvidia that support digital AI platforms, such as ChatGPT, investors are eager for new opportunities. Initially, search bots laid the foundation, and now “agentic AI,” such as customer service bots and research assistants, is paving the way. Investors are increasingly focusing on applications in the physical world, envisioning the potential of AI-powered robots, drones, and autonomous vehicles. Analysts are predicting this is where the financial rewards will begin to manifest.
“As we move into 2025, agentic AI can be seen as a stepping stone leading to that pivotal moment in physical AI,” commented CFRA senior equity analyst Angelo Zino. According to him, “Gen AI hasn’t yet realized much financial gain. But with agentic AI and robotics looming, there’s a growing belief that this is the year their practical uses will start to materialize.” Companies like Uber, Mobileye, known for its driver assistance technology, and Aptiv, an auto parts supplier, are all positioned to benefit from this trend. In the humanoid robot sector, prominent names include Tesla and XPeng. Moreover, Nvidia is anticipated to play a leading role in physical AI, a sentiment echoed by many Wall Street analysts.
Wall Street is forecasting that AI-driven applications will take off this year, with self-driving cars likely to be among the first areas where physical AI developments shine. According to Goldman Sachs analyst Toshiya Hari, physical AI adds “an additional leg to the stool” in the AI build-out phase, expanding what’s currently happening in the AI sector.
Nvidia remains a favorite in AI due to its dominance in the AI chips market. While it excels in agentic AI, its robotics efforts are yet to meet Wall Street’s expectations. However, during a CES keynote, Nvidia founder and CEO Jensen Huang expressed optimism about the company’s hardware and software developments. He suggested that the “ChatGPT moment for general robotics” is approaching, forecasting the development of agentic agents, self-driving vehicles, and humanoid robots.
Huang highlighted Nvidia’s progress in creating agentic models capable of tasks such as coding and customer support and announced Nvidia’s Cosmos platform for developing physical AI systems. According to Nvidia’s press release, this platform can produce videos based on physics using various inputs like video, image text, and sensor data from robots. Companies like XPeng, Uber, and Agile Robots have already adopted this platform, and several humanoid manufacturers have embraced Nvidia’s Project GR00T model.
Goldman’s Hari was impressed by the Cosmos announcement and the speed at which Nvidia is innovating. His positive outlook on Nvidia includes a buy rating and a $165 price target, fueled by Blackwell GPU sales and the growth of data centers powered by generative AI, as well as ongoing investments in cloud and enterprise sectors extending into 2025 and 2026. Though physical AI doesn’t significantly factor into Hari’s short-term outlook for Nvidia, he believes that the concept could enhance confidence in the company’s growth prospects for 2027 and 2028.
Both CFRA’s Zino and Bank of America’s senior analyst Vivek Arya maintain a bullish stance on Nvidia’s expansive reach in AI. Yet, they point out uncertainties regarding how robotics initiatives will reflect in Nvidia’s financial outcomes. Arya noted that Nvidia’s role as a key player in physical AI, rather than producing autonomous devices themselves, positions the company strategically in areas where high profits are attainable, given the competitive and margin-pressured world that device manufacturers navigate.
Zino emphasized that Nvidia’s existing customer and partner base should allow it to “gain significant traction as physical AI unfolds.” Although it’s still too early to predict how the situation will evolve, he maintained that Nvidia is likely to emerge victorious.
Other emerging players in physical AI include companies involved in tech like sensors and control systems, which are poised to benefit. Oppenheimer analyst Colin Rusch singled out autonomous technology developers Aptiv and Mobileye, warehouse automation company Symbotic, and lithium-ion battery manufacturer Amprius Technologies as top picks. “Physical AI is an evolving field set to revolutionize the industrial sector by boosting asset and labor productivity,” Rusch explained in a recent note. He added that as the technology matures, firms with robust balance sheets and access to investment capital will benefit significantly.
Aptiv stands out with its comprehensive approach to sensors, providing technologies that create a reliable picture of the driving environment by integrating data from various sensors. Intel-owned Mobileye is highlighted as a leader in the software architecture realm of physical AI. Oppenheimer’s notes suggest that while vertically integrated players may emerge, Mobileye will likely play a crucial role in enabling legacy OEMs to provide autonomous functionality, crediting their expertise in sensors and autonomous system strategies.
Amprius stands as another top contender with shares rising approximately 105% recently, following the announcement of its SiCore cell, which promises exceptional energy and power performance for sectors like drones and electric vehicles. The firm’s price target hints at a potential surge of over 316% in the coming year.
While the precise timeline for when physical AI will become mainstream remains uncertain, many analysts continue to integrate it into their short- and medium-term models. “Last year, many companies were discussing reaching this turning point within three years, possibly sooner or later,” Zino added, pointing to an eventual multi-trillion-dollar market opportunity for physical AI.
