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Surfing the waves of robotics and AI investment

Sep 06. 2017
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WHEN WE talk about the investment theme that would be highly interesting for decades to come, we are really talking about Robotics and Artificial Intelligence (AI).

This is because it is increasingly clear robots and AI are playing more roles in many sectors. With a lot of research and disruptive development, they appear widely in manufacturing in the form of industrial automation. Nowadays, some manufacturers use collaborative robots or 'Cobots' working together humans in the production lines. 

In transportation and logistics, robots are commonly seen to be working in warehouses of global corporations such as Alibaba or Amazon. They are also hugely popular in medical and public health circle, providing assistance in surgeries. This is not to mention other household robots, such as vacuum robot. It is no exaggeration that robots and AI are about to change our world, the same way humans experienced the change Industrial Revolution brought and the change of the technological revolution in the 1990s.

The use of robotics and AI is showing exponential growth rate. During 2005 – 2013, the global growth rate was only 5 per cent, the estimate for the period between now and 2025 is 10 – 15 per cent, which doubles what happened earlier (Source: Boston Consulting Group cited in AXA Investment Managers Presentation, May 2017).

The need for robots in labor market is also likely to rise due to demographic changes where a larger proportion of workforce age. 

 Coupled with better and more cost- efficient robot production as opposed to an ever-rising cost in human-intensive business, the need for robots will reach a new height. 

Robotics and AI growth is not only limited to Silicon Valley or countries known for robots and AI like the US, Germany, Japan or Israel. It is also a national agenda in China with the Ministry of Science and Technology has recently announced through its website "Intelligent Robot" project, which would catapult the Chinese robot industry into a new level. 

The Chinese robot industry experienced more than 20 per cent growth per year in the past five years . The first half of this year saw more than 59,000 units of robot produced , a rise of 52.3 per cent from the same period last year. Moreover, it was estimated that by 2020, the sales of Chinese robots would reach 150,000 units and that domestic use of robots would be around 800,000 units, totaling more than 10 billion for this industry in China. 

 The above-mentioned growth represents some good opportunities for those who can invest in overseas and long-term securities, in that they can be with Robotics and AI from 'the early stage' and earn from producers and developers of Robotics and AI as well as from those who use and depend on Robotics and AI in their businesses. 

The risk appetite investors who are not accustomed to such overseas securities or simply do not have time to monitor the markets, might just work with Robotics and AI theme through a professionally managed mutual fund globally investing in potential growth company related to robotics and AI industry. 

The fund with active stock selection expertise, together with the portfolio composed with the fast growth small, mid and large companies specialise in robotics and automation is also recommended due to the fact that mega caps and large caps could help retaining the liquidity and decreasing volatility, while mid-small caps could be rich sources for alpha and help enhancing return in the long run. 

In addition, focusing on high growth trends related to robot and AI including industrial automation, transport and logistics, healthcare and the intelligence that power and control robotics is also another key for creating wealth while surfing the waves of Robotics and AI investment.

 However, some investors may have concerns about the significant growth of this specific innovative sector when compared with the 'dot com' bubble crisis. It could be said that the robotics and AI stock valuation is very different. 

If we looked back to the year 2000 and 2001, we would see the fact that some IT companies' stocks were highly-valuated but with significantly limited revenue. Nowadays, the high valuations of the robotics and AI stocks, as well as those in IT sector are also related to the companies' profit.

Concerning the question as to how could we know when the robotics and AI era has reached the peak of the cycle, this can be explained that this robotics and AI revolution cycle would take about four decades from now and we are still in very early stage. Therefore, it's time for investors to invest in robotics and AI investment theme for the highly expected return in the future.

Investment entails risk. Investors should thoroughly study prospectus, product features, return conditions and risks before investing.

Contributed by AssetPlus 


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