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CONTRIBUTORS

Matt Cioppa, CFA

VP/Portfolio Manager and Research Analyst
Franklin Equity Group
United States

Key takeaways

  • Physical artificial intelligence (AI) combines advanced robotics with artificial intelligence to create autonomous systems that can perform complex tasks in dynamic, real-world environments.
  • Applications like autonomous vehicles and industrial automation are moving into mainstream adoption, unlocking new markets and making measurable gains in efficiency, safety and performance.
  • Sitting at the intersection of multiple secular trends (AI, automation, edge computing and digital transformation), we believe physical AI represents a generational opportunity for long-term investors.
     

Physical AI isn’t coming, it’s here

As we discuss in this paper, physical AI—the convergence of robotics and artificial intelligence—is no longer a theoretical concept. It’s a rapidly scaling force reshaping how machines interact with the physical world. From autonomous vehicles and robotic surgery to smart factories and logistics, physical AI is unlocking new levels of precision, adaptability and efficiency.

We see physical AI as a foundational technology with the potential to transform multi-trillion-dollar industries. Its impact will be measured not only in productivity gains, cost savings and margin expansion, but also by establishing a new paradigm for how technology becomes infused on our physical world.

The investment case for physical AI

We are still in the early innings, but in our mind, the trajectory is clear. Physical AI will be a cornerstone of the next industrial era. It represents the convergence of automation, edge computing, AI and digital transformation, and we believe it will create a generational opportunity for long-term investors.

As adoption scales, we expect to see:

  • Recurring revenue models (e.g., per-mile and subscription AV services, robot hardware leases plus software and services)
  • Cross-sector demand (health care, logistics, manufacturing, retail)
  • Ecosystem growth (hardware, software, data infrastructure)
     

Physical AI is not just a technological evolution—it’s a paradigm shift in how machines interact with the world. We believe it can offer long-term investors durable growth and a powerful and differentiated source of long-term alpha.

WHAT ARE THE RISKS?

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