The U.S. is struggling with labor shortages caused by long-term demographic shifts that could take a toll on economic growth for years to come. Meanwhile, advances in large language models and generative artificial intelligence are expected to result in transformative innovations in industries from healthcare to manufacturing and beyond.
These converging trends are expected to drive the development of so-called humanoids, advanced robots with arms, legs, hands and generative AI-powered “brains.” And the adoption of these people-shaped machines could happen even faster than that of autonomous vehicles. This could create opportunities for investors in sectors and companies that are developing the robots and their key components, as well as those that can benefit from integrating humanoids into their labor force.
“Think of the great variety of tasks that humans are able to perform with our bare hands or using tools, and then the multitude of machines designed for human hands and fingers,” says Adam Jonas, Morgan Stanley’s Head of Global Autos and Shared Mobility research. “As the growth of the working-age population in advanced economies continues to decline, humanoids may prove to be a requirement for industries that are already facing difficulty attracting enough workers to remain productive.”
Morgan Stanley analysts estimate that by 2040, the U.S. may have 8 million working humanoid robots, with a $357 billion impact to wages. By 2050, analysts expect the number to rise to 63 million, potentially affecting 75% of occupations, 40% of employees and roughly $3 trillion in payroll.
“The commercialization of humanoid robots will face many challenges, chiefly social and political acceptance given their significant potential to disrupt such a large swath of the global workforce,” says Jonas, noting that as many as 70% of construction jobs and 67% in farming, fishing and forestry could be impacted. “And while they may not be the best solution, they are an increasingly necessary solution for a world facing immense longevity challenges.”
Moving Parts
From an engineering standpoint, humanoids are easier to develop than autonomous vehicles which, after all, are simple robots operating in a highly complex, dynamic and unpredictable environment. While autonomous vehicles have only three physical outputs (steering wheel, accelerator pedal and brake pedal), humanoid robots can have dozens of points of movement at the arms, legs and hands. But unlike an autonomous vehicle driving on a real-life road, humanoid robots can learn and operate in relative safety in a controlled job site or factory. These factors suggest that commercialization of humanoids will happen faster than AVs.
The sectors most likely to benefit from advances in humanoid robots are those with the greatest amount of dangerous physical labor. According to the U.S. Bureau of Labor Statistics, transportation and warehousing, construction, manufacturing, agriculture and mining are among the most hazardous industries to work in, meaning companies that deploy humanoids could gain an advantage. Meanwhile, jobs with the most repetitive, boring or dangerous tasks, and industries that are most unionized or have the highest unit labor costs could also face humanoid disruption.
“We estimate humanoids have the potential to bring about cost savings of roughly $500,000 to $1 million per human worker over 20 years,” Jonas says. Analysts estimate the cost of building a humanoid robot could run from $10,000 to $300,000, based on how they are configured and how they will be used.
Eventually, humanoids that can mimic human expression and communication—such as the droids in Star Wars—may ease the way for their acceptance across other categories, including healthcare and education, and job functions that require them to collaborate with humans.
Optimistic Future
The development of humanoids that can navigate complex human environments will likely require continued advancements in generative AI, as well as the refinement of motion capabilities, sensors and battery capacity. While advanced humanoid development is in the early stages, progress in these technologies over the past few years has provided a significant boost.
“Investors have opportunities in ‘enablers’—the sectors and companies that will build the components and assemble and market the finished humanoids,” says Ed Stanley, Head of European Thematic Research at Morgan Stanley. “Those include companies making the generative AI that will power the robots’ brains, the mechanics that make their bodies run, and the battery storage needed to power them. Further development in those three areas will be key to achieving humanoid commercialization.”
Societies will have to grapple with myriad regulatory and safety issues, in addition to pushback over shifts in the labor market. But as with previous technological leaps in business—automation, computing, e-commerce and now generative AI—society should adjust over time.
“We see a more optimistic future than the one painted by technology de-accelerationists, one in which robots continue to complement and further enhance human labor and productivity and one in which mundane and hazardous work can be outsourced,” says Stanley. “While the path to reach market viability and at scale may take decades to play out, we think there will be a number of developments and milestones in humanoid components over the next year.”
For deeper insights and analysis, ask your Morgan Stanley Representative or Financial Advisor for the full report, “Humanoids: Investment Implications of Embodied AI,” (June 26, 2024).
