About this episode
Our analysts Adam Jonas and Sheng Zhong discuss the rapidly evolving humanoid technologies and investment opportunities that could lead to a $5 trillion market by 2050. Read more insights from Morgan Stanley. ----- Transcript ----- Adam Jonas: Welcome to Thoughts on the Market. I'm Adam Jonas Morgan Stanley's Global Head of Autos and Shared Mobility. Sheng Zhong: And I'm Sheng Zhong, Head of China Industrials. Adam Jonas: Today we're talking about humanoid robots and the $5 trillion global market opportunity we see by 2050. It's Thursday, May 15th at 9am in New York. If you're a Gen Xer or a boomer, you probably grew up with the idea of Rosie, the robot from the Jetsons. Rosie was a mechanical butler who cooked, cleaned, and did the laundry while dishing out a side of sarcasm. Today's idea of a humanoid robot for the home is much more evolved. We want robots that can adapt to unpredictable environments, and not just clean up a messy kitchen but also provide care for an elderly relative. This is really the next frontier in the development of AI. In other words, AI must become more human-like or humanoid, and this is happening. So, Sheng, let's start with setting some expectations. What do humanoid robots look like today and how close are we to seeing one in every home? Sheng Zhong: The humanoid is like a young child, in my opinion, although their abilities are different. A robot is born with a developed brain that is Large Language Model, and its body function develops fast. Less than three years ago, a robot barely can walk, but now they can jump, they can run. And just in last week, Beijing had a humanoid half marathon. While robot may lack on connecting its brain to its body action for work execution; sometimes they fail a lot of things. Maybe they break cups, glasses, and even they may fall down. So, you definitely don't want a robot at home like that, until they are safe enough and can help on something. To achieve that a lot of training and practice are needed on how to do things at a high success rate. And it takes time, maybe five years, 10. But in the long term, to have a Rosie at every family is a goal. So, Adam, our U.S. team has argued that the global humanoid Total Adjustable Market will reach $5 trillion USD by 2050. What is the current size of this market and how do we get to that eye-popping number in next 25 years? Adam Jonas: So, the current size of the market, because it's in development phase, is extremely low. I won't put it a zero but call it a black zero – when you look back in time at where we came from. The startups, or the public companies working on this are maybe generating single digit million type dollar revenues. In order to get to that number of $5 trillion by 2050 – that would imply roughly 1 billion humanoids in service, by that year. And that is the amount of the replacement value of actual units sold into that population of 1 billion humanoid robots on our global TAM model. The more interesting way to think about the TAM though is the substitution of labor. There are currently, for example, 4 billion people in the global labor market at $10,000 per person. That's $40 trillion. You know, we're talking 30 or 40 per cent of global GDP. And so, imagining it that way, not just in terms of the unit times price, but the value that these humanoids, can represent is, we think, a more accurate way of thinking about the true economic potential of this adjustable market. Sheng Zhong: So, with all these humanoids in use by 2050, could you paint us a picture in broad strokes of what the economy might look like in terms of labor market and economic growth? Adam Jonas: We can only work through a scenario analysis and there's certainly a lot of false precision that could be dangerous here. But, you know, there's no limit to the imagination to think about what happens to a world where you actually produce your labor; what it means for dependency ratios, retirement age, the whole concept of a GDP could change. I don't think it's an exaggeration to contemplate these technologies being comparable to that of electric light or the wheel or movable type or paper. Things that just completely transform an economy and don't just increase it by five or 10 per cent but could increase it by five or 10 times or more. And so, there are all sorts of moral and ethical and legal issues that are also brought up. The response to which; our response to which will also dictate the end state. And then the question of national security issues and what this means for nation states and, we've seen in our tumultuous human history that when there are changes of technologies – even if they seem to be innocent at first, and for the benefit of mankind – can often be uh, used to, grow power and to create conflict. So Sheng, how should investors approach the humanoid theme and is it investible right now? Sheng Zhong: Yes, it's not too early to invest in this mega trend. Humanoid will be a huge market in the future, like you said. And it starts now. There are multi parties in this industry, including the leading companies from various background: the capital, the smart people, and the government. So, I believe the industry will evolve rapidly. And in Morgan Stanley’s Humanoid: A Hundred Report a hundred names was identified in three categories. They are brand developers, bodies components suppliers, and the robot integrators. And we'd like to stick with the leading companies in all these categories, which have leading edge technology and good track record. But at the meantime, I would emphasize that we should keep close eyes on the disruptors. Adam Jonas: So, Sheng, it seems that national support for the humanoid and embodied AI theme in China is at least today, far greater than in any other nation. What policy support are you seeing and how exactly does it compare to other regions? Sheng Zhong: Government plays an important role in the industry development in China, and I see that in humanoid industry as well. So currently, the local government, they set out the target, and they connect local resources for supply chain corporation. And on the capital perspective, we see the government background funds flow into the industry as well. And even on the R&D, there are Robot Chinese Center set up by the government and corporates together. In the past there were successful experience in China, that new industry grow with government support, like solar panels, electronic vehicles. And I believe China government want to replicate this success in humanoids. So, I won't be surprised to see in the near future there will be national humanoid target industry standard setup or adoption subsidies even at some time. And in fact we see the government supports in other countries as well. Like in South Korea there is a K Humanoid Alliance and Korean Ministry of Trade has full support in terms of the subsidy on robotic R&D infrastructure and verification. So, what is U.S. doing now to keep up with China? And is the gap closing or widening? Adam Jonas: So, Sheng, I think that there's a real wake up call going on here. Again, some have called it a Sputnik moment. Of course the DeepSeek moment in terms of the GenAI and the ability for Chinese companies to show just extraordinary and remarkable level of ingenuity and competition in these key fields, even if they lack the most leading-edge compute resources like the U.S. has – has really again been quite shocking to the rest of the world. And it certainly gotten the attention of the administration, and lawmakers in the DOD. But then thinking further about other incentives, both carrot and stick to encourage onshoring of critical embodiment of AI industries – including the manufacturing of these types of products across not just humanoids, but electronic vertical takeoff and landing aircraft drones, autonomous vehicles – will become increasingly evident. These technologies are not seen as, ‘Hey, let's have a Rosie, the robot. This is fun. This is nice to have.’ No, Sheng. This is seen as existential technology that we have to get right. Finally, Sheng, as far as moving humanoid technology to open source, is this a region specific or a global trend? And what is your outlook on this issue? Sheng Zhong: I actually think this could be a global trend because for technology and especially for humanoid, the Vision Language Model is obviously if there is more adoption, then more data can be collected, and the model will be smarter. So maybe unlike the Windows and Android dominant global market, I think for humanoid there could be regional level open-source models; and China will develop its own model. For any technology the application on the downstream is key. For humanoid as an AI embodiment, the software value needs to be realized on hardware. So I think it's key to have mass production of nice performance humanoid at a competitive cost. Adam Jonas: Listen, if I can get a humanoid robot to take my dog, Foster out and clean up after him, I'm gonna be pretty excited. As I am sure some of our listeners will be as well. Sheng, thank you so much for this peak into our near future. Sheng Zhong: Thank you very much, Adam, and great speaking with you, Adam Jonas: And thanks for listening. If you enjoy Thoughts on the Market, please leave us a review wherever you listen and share the podcast with a friend or colleague today.