CNBC's Pia Singh explains how recent advancements in Artificial Intelligence are raising expectations that humanoid robots and driverless cars could be around the corner—and why investors are still skeptical of their use cases.

San Francisco

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

A new frontier is emerging in artificial intelligence known as "physical AI." Analysts suggest that this development could evolve into a multi-trillion-dollar industry, although skepticism among investors persists regarding its projected applications. Following the initial boom in AI with search bots, the focus has shifted to agentic AI in roles like customer service and research. Current advancements are accelerating the evolution of AI into the physical realm, including humanoid robots and autonomous technologies such as drones and driverless cars.

Goldman Sachs analysts have recognized physical AI as an added dimension to the ongoing development of artificial intelligence. Innovations in this field are generating investment opportunities across various sectors, including robotics, automotive suppliers, and specialty semiconductor companies. Companies such as Tesla, XPeng, and NVIDIA are prominent players, with leading positions in the emerging humanoid market. Meanwhile, companies like Uber, Mobileye, and Aptiv are expected to benefit from these advancements.

Looking forward, the potential of physical AI—particularly humanoid robots—is notable, with sections of Wall Street predicting these machines could replace human workers on a large scale by 2030. Estimates from Morgan Stanley suggest that the humanoid population could reach 40,000 by 2030 and expand to 63 million by 2050. However, the timeline for the development and adoption of physical AI remains uncertain, causing analysts to debate the most effective applications. CFRA research analyst Angelo Zeno forecasts that significant physical AI applications may become evident within three years, potentially marking the beginning of a vast market.



'Physical AI' next frontier for artificial intelligence

A whole new world of artificial intelligence is emerging in the form of physical AI. Analysts are floating that it could become a multi-trillion dollar industry, but investors remain skeptical of this utopian technology. Search bots started this AI bull cycle, and companies are now pioneering agentic AI, like customer service representatives or research and coding assistants. Breakthroughs are now speeding up the development of applications in the physical world, like humanoid robots and autonomous drones and cars. One Goldman Sachs analyst told me, physical AI has added an extra leg to the stool in the buildup of artificial intelligence. These new innovations could create more AI investment opportunities in robotics makers, auto suppliers, and specialty semiconductor companies. Just a few publicly traded American and Chinese electric vehicle makers, like Tesla and XPeng, are leading the burgeoning humanoid market. And of course, NVIDIA is a huge frontrunner in agentic and physical AI. Uber, along with Mobileye, a driver assistance tech maker, and Aptiv, an auto parts supplier, could be beneficiaries too. That's not even to mention the billions that are being pumped into hot startups. Looking ahead to the next few decades, there's huge opportunity alone in humanoids, which pockets of Wall Street forecast will start replacing human workers at scale by 2030. Some analysts say that there will be an even bigger market for these machines than for robo-taxis and self-driving vehicles. Major firms are already placing big bets. Morgan Stanley estimates the humanoid population will be 40,000 by 2030 and swell to 63 million by 2050. Still, investors and industry experts can't agree on the best use cases for some AI technologies, especially humanoids. There's still no exact timeline on when the physical AI opportunity will emerge, and most analysts are still struggling to incorporate it into their short- and medium-term models. CFRA research analyst Angelo Zeno expects physical AI applications to really ramp within a three-year span, but it could be later. He says, that's when we could start seeing a multi-trillion-dollar total addressable market for physical AI.

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Rise of AI