This article was originally published on Opto – Invest in the Next Big Idea.
Although the gains in robotics companies were marginal, the uplift was seen across all three funds in Opto’s Theme Performance Screener.
The ARK Autonomous Technology & Robotics ETF [ARKQ], Global X Robotics & Artificial Intelligence ETF [BOTZ], and iShares Robotics and Artificial Intelligence Multisector ETF [IRBO] ticked up by 0.6%, 0.1% and 0.2%, respectively, on the day of the announcement.
The iShares Robotics and Artificial Intelligence Multisector ETF and ARK Autonomous Technology & Robotics ETF have both outperformed the broader market so far in 2021. The funds were up 7% and 7.9% year-to-date, respectively, at $42.63 and $82.31 on 30 March, outpacing the S&P 500’s 5.4% climb in the same period.
However, the Global X Robotics & Artificial Intelligence ETF was down 0.8% to $32.86 in the same period. According to ETFDB data, all three funds had a combined $4.5bn in assets under management as of 30 March.
Programmed for gains
As one of the fastest-growing segments disrupting the technology sector, robotics and automation appears to have plenty of momentum.
A new survey by Interact Analysis, in partnership with the Association for Advancing Automation, forecast the industry to see headcount, revenue and investment growth in excess of 10% for 2021.
The majority of more than 200 respondents expected the automotive market to be the top driver of growth, despite the recent downturn in vehicle sales. This was closely followed by the food and beverage sector, with other industries such as marine, rail and aerospace not predicted to generate as much growth.
The report also noted that the industry expected an average 26% increase in automation investment by customers over the year.
Ash Sharma, MD and research director at Interact Analysis, explained that there are clear reasons why the automation sector will lead the COVID-19 recovery.
“The increase in ecommerce and online shopping is driving investment in warehouse automation as companies seek speed and efficiency in the distribution process. On top of this, manufacturing industries are also responding to the need to future-proof themselves against further global shocks,” Sharma wrote in a review of the survey, published on the company website.
An overwhelming majority of respondents projected that COVID-19 would have a minimal or zero impact on the industry by August 2022.
Capturing the future of innovation
According to TheStreet, the utilisation of robotics first increased in popularity as a market theme during the second half of 2016. Global X’s Robotics & Artificial Intelligence ETF was launched in September that year, putting it in a good position to capture potential growth.
When looking at the long-term investment potential of the industry, the market opportunity appears significant.
According to Research and Markets, the global process automation market is forecast to hit $114.17bn by 2025, increasing at a compound annual growth rate of 7.23%. The research platform noted that industrial robot sales had increased almost four-fold since 2009 and pointed to Asia as the world’s most robust growth market for the industry.
In 2017, the robotics sector was one of the best-performing in the market, the publication noted, with the Global X Robotics & Artificial Intelligence ETF climbing 58% throughout the year. In comparison, the fund rose 52% in 2020.
However, given that the robotics and automation industry offers attractive growth, investors suspect that there will be more competition as a result.
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Guest Author at MyWallSt
The investment universe is changing beyond all recognition, and with a thematic focus, investors can capitalise on this wholesale disruption. From Genomics to Artificial Intelligence, disruptive innovation empowers companies to displace industry incumbents, and secure majority market share. Opto exists to identify those businesses, and help investors to invest in the next big idea.