In this article, we will look at the 8 Most Promising Robotics Stocks According to Hedge Funds.
The Service Robotics Industry Is on the Move
The robotics industry was once considered to eat human jobs and replace them with machines. However, robotics is not about replacing humans but it’s about improving and automating human tasks to reduce time and improve task efficiency. The AI boom has accelerated the adoption of automation in organizations. Companies, especially after the launch of ChatGPT, have been relying on generative AI services. Now, we are experiencing robotics alongside AI, a revolutionary development. Hospitality, agriculture, professional cleaning, automotive, and medical are some of the biggest industries using robots.
According to the International Federation of Robotics (IFR), the sales of professional service robots soared by 30% in 2023 worldwide. IFR’s statistics department registered over 205,000 robotics units in 2023, with the Asia-Pacific region recording the highest sales in the world. The Asia-Pacific region reported 80% of global robotics sales, accounting for almost 162,284 units.
The transportation and logistics service was among the markets with the highest robotics sales in 2023. The total units built for the application class transportation and logistics was approximately 113,000, up 35% year-over-year. The demand for the robotics industry is due to a shortage of skilled labour, as per the 2024 report by IFR. Elon Musk has been in the news since the launch of his company’s robotaxis. The robotaxis could be a game changer for robotics automation in outdoor environments.
Hospitality robots are another big thing in the robotics industry today. In 2023, more than 54,000 units were sold in the hospitality sector, with mobile guidance, information, and telepresence robots accounting for most of the robotics units. Sales for agricultural robots were 20,000, while cleaning robots reported sales of 12,000 units, up by 21% and 4%, respectively. Professional cleaning robots are mainly being used for floor cleaning, which represents nearly 70% of the total units sold in 2023. Medical remains another growing sector as medical robots soared by 36% to almost 6,100 units. The demand for surgery and diagnostics robots was the highest as they grew by 14% and 25% year-over-year.
The US Robotics Market
The United States remains the leader among the service and medical robot manufacturers. Nearly 199 companies are based out of the US, with 66% of them producing professional service robots, 27% consumer service robots, and 12% medical robots. China follows the US with 107 service and medical robot manufacturers, while Germany ranks third with 83 companies. Earlier this year, Bill Gates pointed out several “cutting-edge robotics startups and labs” that excite him, including three companies focused on developing humanoids. One of them is Agility Robotics which focuses on developing human-centric, multipurpose robots for logistics work.
Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ), Robo Global Robotics and Automation Index ETF (NYSE:ROBO), and First Trust Nasdaq Artificial Intelligence & Robotics ETF (NASDAQ:ROBT) are three of the well-known robotics ETFs. These ETFs have surged more than 37%, 20%, and 19% over the last 1 year, as of November 7. The average return of these ETFs is over 25% in the last 1 year, which is lower than the S&P 500 index returns of over 35% during the same period.
With that, let’s take a look at the 8 most promising robotics stocks according to hedge funds.
A robotic process automation system in a modern datacenter.
Our Methodology
For this list, we sifted through various ETFs and internet rankings covering robotics stocks to compile an initial list. We then selected the top robotics stocks that were the most popular among hedge funds and had a market capitalization of at least $1 billion, as of November 7. We ranked the top 8 stocks based on the number of hedge fund holders in Q2 2024 as per Insider Monkey’s database. The list is ranked in ascending order of the number of hedge fund holders.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Most Promising Robotics Stocks According to Hedge Funds
8. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 29
UiPath Inc. (NYSE:PATH) is a well-known software as a service (SaaS) enterprise that offers robotic process automation and artificial intelligence software. UiPath automation services allow companies to streamline their business processes through advanced AI and machine learning technologies. The company has a subscription-based model, offering software solutions to over 10,810 customer accounts globally.
UiPath Inc. (NYSE:PATH) has been one of the worst-performing growth stocks in 2024 as it has plunged over 45% this year, as of November 7. However, with the return of founder Daniel Dines in June, UiPath is looking to implement a new growth plan with a focus on combining its conventional robotic process automation (RPA) with agentic AI, meaning that the systems will perform tasks with no human intervention. The long-term prospects remain intact with developments in its automation platform via AI.
UiPath Inc. (NYSE:PATH) expects its full-year annual recurring revenue (ARR) for fiscal 2025 between $1.665 billion and $1.670 billion, below expectations of $1.725 billion and $1.730 billion. The lower-than-expected ARR for fiscal 2025 has impacted investors’ sentiment. However, UiPath improved its annual recurring revenue to $1.551 billion in Q2, up by 19% year-over-year. In addition, the company targets larger enterprise clients, with 2,163 customers generating over $100,000 in ARR. These customers secure long-term revenue streams for UiPath.
UiPath Inc. (NYSE:PATH) continues to work on its ability to scale its subscription-based model while investing in its AI-driven capabilities. The company is up against larger enterprise players like Microsoft and Salesforce, but its strategic collaborations with AWS, Google, and Microsoft improve its scalability and integration capabilities.
7. Zebra Technologies Corporation (NASDAQ:ZBRA)
Number of Hedge Fund Holders: 35
Zebra Technologies Corporation (NASDAQ:ZBRA) has emerged as one of the top robotics companies. Zebra Technologies offers various software and hardware, with autonomous mobile robots among its famous product lines. The firm operates through two segments including, Asset Intelligence & Tracking (AIT) and Enterprise Visibility & Mobility (EVM). The company’s famous Fetch100 Roller and Fetch100 Shelf help transport objects such as bins, totes, and packages in workplaces, while Fetch100 Research is designed to support the demands of teachers and academics. The company has customers all over the world in industries including retail, manufacturing, transportation and logistics, and healthcare.
In 2021, Zebra Technologies Corporation (NASDAQ:ZBRA) acquired Fetch Robotics for $290 million. Zebra Technologies has been aggressively expanding its presence in the robotics industry since the acquisition of the robotics firm. Considering the opportunity in the robotics market, Zebra Technologies is primarily targeting the autonomous mobile robot industry. The company sells its products and services mainly through distributors, value-added resellers (VAR), independent software vendors (ISVs), direct marketers, and OEMs.
Over the past year, ZBRA has surged over 90%, as of November 7. Zebra Technologies Corporation is currently unprofitable, however, sales are improving. The company is continuing to expand its robotics portfolio with new products and services. During ZONE, the company revealed its latest offerings which are embedded with AI, cloud, and machine learning to further advance workflow efficiencies. The latest solutions include the new Zebra Kiosk System and Workcloud Actionable Intelligence 7.0.
In Q3 2024, Zebra Technologies Corporation (NASDAQ:ZBRA) exceeded the expected net sales target and saw a growth of 31.3% year-over-year. Whereas, the company’s services and software recurring revenue businesses grew 4% year-over-year in Q3. With steady revenue growth, the company has been focused on a restructuring approach in recent months to strengthen cash flow and improve net expense savings. For the full year 2024, Zebra Technologies expects to book $60 million in incremental savings and maintain a free cash flow of around $700 million.
6. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders: 41
Teradyne, Inc. (NASDAQ:TER) is a renowned supplier of automated test equipment and robotics solutions globally. The company operates through four segments including Semiconductor Test, System Test, Wireless Test, and Robotics. The company’s robotics segment designs and manufactures robotic arms, autonomous mobile robots, and advanced robotic control software.
Teradyne, Inc.’s (NASDAQ:TER) robotics business is operating in an industrial macro backdrop. Compared to Teradyne’s industrial automation peers experiencing an average decline of over 10% year-over-year, the company’s robotics business has delivered 8% growth, as of Q3. The company’s main focus remains on robotics go-to-market transformation and developing OEM solutions for Universal Robots. Moreover, the OEM growth has helped Teradyne Robotics to outperform its peer group in budget-constrained market conditions.
Teradyne Robotics’ autonomous mobile robot arm MiR is working in collaboration with its Danish partner collaborative robot firm Universal Robots. Earlier in 2024, Teradyne Robotics partnered with NVIDIA to bring new AI capabilities to automation applications. The company’s MiR1200 Pallet Jack is a breakthrough product backed by NVIDIA-powered AI. MiR1200 is developed to solve a severe problem in the physical industrial world. The company has completed the beta customer trials of MiR1200 and expects commercial deliveries in Q4. This is a huge development for Teradyne as MiR1200 will bring an additional revenue stream once it makes it to the market.
5. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 42
The Boeing Company (NYSE:BA), mainly known for its traveling aircraft, is one of the world’s largest producers of civilian and military aircraft. The company uses autonomous robots in a large portion of its military operations. The company’s Echo Voyager is an autonomous underwater vehicle (AUV) that’s used by the military to transport equipment deep beneath the sea. The Boeing Company is also expanding its operations into space with its X-37B, which operates within 150 to 500 miles above Earth for long-term space missions.
The Boeing Company (NYSE:BA) has been suffering over the past few years due to quality issues, which has taken a financial hit. After depleting its free cash flow margin from the high of 13.9% in 2018, Boeing is trying to overcome its quality control problems and leadership failures. Lately, the company has been trying to recover and in 2022 and 2023, its free cash flow turned positive. However, after disappointing Q3 outcomes, the company expects to have cash outflows in Q4 and the full year 2025.
The Boeing Company (NYSE:BA) suffered a net loss of $6.17 billion in Q3, taking the total loss toll to almost $8 billion in 2024 so far. In Q3, the company’s revenue was reported at $1.34 billion, a slight decrease of 1% year over year. Boeing’s CFO during the earnings call addressed that turning this big ship will take time and the firm has the potential to be great again.
A notable development for the company is that its machinists have ended their two-month strike and will be back to work after a new union contract was agreed on November 4. In addition, Boeing benefits from the ongoing wars as it is one of the largest defense contractors. On September 30, Boeing received an order of $6.9 billion from the US Air Force to supply small-diameter bombs (SDB). Despite the challenges, the company remains a major defense player with its autonomous robot arms in demand.
4. Stryker Corporation (NYSE:SYK)
Number of Hedge Fund Holders: 53
Stryker Corporation (NYSE:SYK) is a leading medical technology firm that offers products and services in Medical and Surgical, Neurotechnology, Orthopedics, and Spine. The company has its robotics arm, Mako, that develops spinal and knee devices, among other products. Stryker also specializes in soft tissue fixation products and delivering AI-assisted virtual care workflows. Apart from other wide range of medical products, the company also assists surgeons in visualizing and reviewing patients via Apple Vision Pro.
SYK has a three-year EPS compound annual growth rate (CAGR) of 18.01% and revenue CAGR of 9.60%, respectively. With that SYK seems promising, in addition to considering its portfolio and penetration in the medical market. The company continues to experience the adoption of robotic-assisted surgery. Stryker Corporation has initiated early cases with both its Spine Guidance 5 software featuring Copilot and Mako Spine Robot. In addition to its spine operations, the company’s U.S. knee business during Q3 increased 8.4% organically, reflecting its market-leading position in robotic-assisted knee procedures. Further, Stryker’s U.S. Hip business experienced 10.9% organic growth in Q3 driven by the continued success of the firm’s insignia, hip stem, and momentum from its Mako robotic hip platform.
Stryker Corporation (NYSE:SYK) plans to expand its portfolio of wirelessly connected medical devices and improve its growing healthcare IT offering with its new acquisitions. In that regard, SYK has improved its 2024 full-year guidance, increasing its organic sales growth expectations from 9.5% to 10%, as of Q3.
Stryker Corporation (NYSE:SYK) was recognized by Baron Funds in its investor letter for the first quarter of 2024. Here is what the fund said:
“We also added to Surgery Partners, Inc., a leading operator of ambulatory surgery centers, and Stryker Corporation (NYSE:SYK), a large diversified medical device company. We think Surgery Partners should benefit from a multi-year trend of surgical procedures migrating from inpatient hospitals to outpatient centers. Stryker reported strong fourth quarter financial results, highlighted by 11.5% organic revenue growth, and management provided solid guidance for 2024, calling for 7.5% to 9.0% organic revenue growth and double-digit EPS growth.”
Canaccord raised the price target on SYK to $400 from $360 and kept a Buy rating on the shares following impressive Q3 results.
3. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 54
RTX Corporation (NYSE:RTX) is a leading aerospace and defense company that has drone-based missile systems and counter-drone technologies. One of RTX’s military robots is the “Coyote,” a drone used to track and shoot down enemy UAVs. RTX offers a wide range of advanced systems and services for commercial, military, and government customers globally. The company operates its services and products through three businesses, Collins Aerospace, Pratt & Whitney, and Raytheon.
RTX Corporation (NYSE:RTX) remains a major player in the military drone market and also remains a major manufacturer of radars, sensors, and electronic warfare equipment, and has a strong position in the global military drone market.
Lately, RTX Corporation (NYSE:RTX) has won three separate contracts worth $1.5 billion from the US armed forces. The biggest contract is worth $736.6 million, with the order of over 1,100 AIM-9X Sidewinder air-to-air missiles. Whereas, the second order is worth $525.5 million, supplying Evolved Seasparrow air defense guided missiles for the US Navy and its allies. The final order of $254.5 million was received for the maintenance of standard missiles, also used for air defense.
As we can see, RTX is progressing with its new advanced machinery and receiving major orders from the US government. During Q3 2024, RTX Corporation (NYSE:RTX) showed notable operational achievements, including an 8% increase in organic sales. By the end of Q3, RTX had an impressive $2 billion of free cash flow. After strong results in Q3, the company has raised its outlook for the full year 2024 and expects sales between $79.25 billion to $79.75 billion, while the EPS is anticipated to be between $5.50 and $5.58 per share.
2. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 67
Intuitive Surgical, Inc. (NASDAQ:ISRG) is one of the most promising healthcare companies that is revolutionizing surgical robotics. The company developed its da Vinci System to assist with minimally invasive surgeries. The company’s da Vinci system has demonstrated positive outcomes across multiple procedures and clinical specialties and in the past three decades, it has performed 14 million procedures. Da Vinci captures a massive 57% of the global market with a key brand presence and competitive advantage.
Intuitive Surgical’s robots are continuously becoming popular for improving minimally invasive procedures. During the Q3 call, the company revealed that its procedure in DaVinci multi-port has a five-year compound annual growth rate (CAGR) of 17%, with nearly 10 million patients treated using DaVinci multi-port in the past five years. By the end of the third quarter of 2024, Intuitive Surgical, Inc. (NASDAQ:ISRG) had installed more than 9,000 systems, with the installed base growing by 14% year-over-year.
Intuitive Surgical, Inc. (NASDAQ:ISRG) seems to have a positive catalyst moving forward as it continues to expand its system installations across hospitals. For now, Intuitive Surgical does not have much competition and the company seems perfect with no debt and a solid $8.3 billion in cash and investments. At the same time, ISRG’s 10-year earnings compound annual growth rate (CAGR) is over 15%, showcasing healthy growth over a long period.
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
Tesla, Inc. (NASDAQ:TSLA) has been all about excitement over the past few years, following its rise in the EV market and then facing severe competition from Chinese competitors. However, Tesla is trying to make a comeback as it seems to be one of the most promising growth stocks according to the hedge funds, as it bets on AI and robotics. Even though the company makes the majority of its revenues in selling electric vehicles, it also operates a lucrative energy storage business that promises to generate long-term value. Now, with the launch of robotaxis, it can be a game changer for Tesla, according to Dan Ives, Wedbush Securities managing director.
Analysts have had a mixed take on Tesla’s robotaxis. During an earnings call in 2019, Elon Musk promised to put a fleet of one million robotaxis on the road in 2020. Five years later, Musk finally revealed its robotaxis along with a Robovan and Tesla bot. According to RBC Capital Markets global autos analyst, Tom Narayan, Tesla’s robotaxis could generate over $1.7 trillion in revenue by 2040. CNBC’s Jim Cramer was not pleased at all after Tesla’s Robotaxi unveiling. While impressed by the concept of the Cybercab, Cramer said the event’s demonstration lacked substance and failed to prove its technological prowess.
Tesla seems to struggle as an EV company and is focusing on diversifying its revenue base. However, it remains a promising robotics stock after its recent launch event.
ClearBridge Small Cap Value Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles, related software and components, and solar and energy storage products. The stock contributed as Tesla continued to drive vehicle manufacturing costs lower, accelerate the launch of new models, and invest heavily in its lucrative AI initiatives. Shareholders reaffirmed the CEO’s compensation plan, alleviating personnel and legal uncertainties. Despite material operational complexities resulting in significant shutdowns of key manufacturing facilities and lower sales volume, Tesla presented better-than-expected margins in the quarter. It expects to launch a lower-cost model as soon as late 2024, which should result in accelerated revenue growth, reduced manufacturing costs, and increased factory utilization. The company continued to advance its autonomous driving capabilities, expanding its already significant data centers and developing its humanoid robot Optimus. These investments increased confidence in the attractive growth opportunities that remain ahead.”
While we acknowledge the potential of TSLA to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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