The Next AI Bubble: Physical Intelligence
Robotics and Embodied AI is going to start getting A LOT more attention
Recap
✅ Back on Aug 17, I shared how the market flows shifted even with hotter than expected Core CPI and PPI and I shared how 3% persistent inflation will be good for markets, read below 👇
Below is excerpt from Aug 17th post:
New 52-Week Highs vs New 52-Week Lows
NYSE New 52-Week Highs: 139 vs New 52-Week Lows: 16
Nasdaq New 52-Week Highs: 363 vs New 52-Week Lows: 65
McClellan Oscillator
Back to normal bull market readings
New Highs - New Lows
Recovery as dip was bought. Note the Nasdaq 100 strength compared to the rest of the indices.
*This my personal blog and is not investment advice—I am not a financial advisor but a random person on the internet who does not have a license in finance or securities. This is my personal Substack which consists of opinions and/or general information. I may or may not have positions in any of the stocks mentioned. Don’t listen to anyone online without evaluating and understanding the risks involved and understand that you are responsible for making your own investment decisions.
Posts of Interest
Note that IWM saw a weekly close above that key 245 I have been following and pointing out—this is bullish because we saw a rejection then it recovered with a weekly clove above it.
Cutting rates into 3% persistent inflation is extremely bullish for risk assets.
Megacaps is where most of the capital will flow into
The Mag 7 stocks have performed roughly in-line so far with the market but expect this to decouple and Megacaps start to outpace the overall market as they push into bubble territory.
The Next Bubble: Physical Intelligence
I’m linking my ChatGPT Deep Research on Physical Intelligence (Robotics and Embodied AI) HERE for your review.
The ChatGPT Deep Research article touches on why I’m very bullish Amazon AMZN 0.00%↑ and Tesla TSLA 0.00%↑ when it comes to physical intelligence. Below is an excerpt from the ChatGPT Deep Research article linked above:
Physical Intelligence is the next evolution beyond software-only AI
It bridges digital intelligence with tangible actions. The rise of Physical Intelligence is grounded in strong economic and technological drivers, creating opportunities across near-term (1-3 years) and long-term (5-10+ years) horizons.
Technological Advancements: Breakthroughs in AI models, sensors (e.g., LiDAR, machine vision), and computing power are enabling robots to handle complex, unstructured tasks. For instance, generative physical AI allows systems to simulate and adapt to real-world physics in real time, accelerating deployment in warehouses and manufacturing.
Labor Market Pressures: Global labor shortages, driven by aging populations and post-pandemic shifts, are pushing automation. The manufacturing and logistics sectors alone face a projected shortfall of millions of workers by 2030. Physical Intelligence addresses this by automating repetitive or dangerous jobs, improving efficiency and safety.
Efficiency and Cost Savings: In logistics, robots can reduce operational costs by 20-50% through faster processing and fewer errors. Healthcare benefits from robotic surgery for precision, while drones enhance delivery speeds in e-commerce. Smart factories integrate AI for predictive maintenance, boosting productivity.
Market Potential: The robotics market is projected to grow from $53 billion in 2024 to over $200 billion by 2030, but the broader opportunity lies in automating a $50 trillion annual global labor output. Near-term wins include warehouse automation (e.g., Amazon’s fulfillment centers) and drones for last-mile delivery. Long-term, humanoid robots could transform home assistance, elderly care, and general manufacturing, with full autonomy unlocking exponential value.
Industry Applications:
Logistics/Warehousing: AI robots handle inventory, sorting, and transport.
Manufacturing: Embodied AI in assembly lines for customization.
Healthcare: Surgical robots with real-time decision-making.
Defense/Agriculture: Drones and autonomous systems for monitoring and operations.
These tailwinds are already translating to revenue growth for established players, with many reporting double-digit increases in automation segments.
Why Physical Intelligence Could Inflate into the Next Market Bubble
While fundamentals are solid, speculative elements mirror past bubbles like dot-com, crypto, and the recent AI surge. Focus first on the tailwinds above, but overlay the hype:
Hype Cycles and Valuation Inflation: Like AI chips in 2023-2024, Physical Intelligence is attracting massive venture capital—e.g., startups like Physical Intelligence raised $400 million for robot software. Media buzz around humanoid robots (e.g., Tesla’s Optimus) drives stock premiums, with P/E ratios soaring despite uncertain timelines. If adoption lags, overvaluations could correct sharply.
Capital Influx: Billions are pouring into robotics funds and SPACs, similar to the AI boom where liquidity fueled 100x gains before pullbacks. Non-revenue companies like Serve Robotics trade at extreme multiples (e.g., 430x price/sales) on future promises, echoing OKLO and SMR in the AI energy space.
Speculative Risks: Echoing warnings from the AI bubble, if Physical Intelligence fails to deliver quick ROI (e.g., due to regulatory hurdles or high costs), it could burst, impacting broader markets.
Elon says Tesla is projecting 80% of value from Optimus, suggesting a real potential amid the froth (if you believe him).
In short, fundamentals provide a base, but hype could inflate a bubble, with early investors benefiting from influx before any pop.
These stocks span U.S. and international markets. For revenue-focused safety, prioritize AMZN, NVDA, TSM; for physical intelligence upside as well as TSLA, SERV, HSAI. Risks include tech delays, competition, and economic slowdowns, but substantiated growth trajectories support the theses.
Forecast
Stock price breadth is still in extreme fear and as you saw about, the QQQJ (juniors) did not make a net new high—this is why my recent forecast is that the Megacaps are going to go into bubble territory. Amazon is going to $3T+
Notice when most AAII Investor sentiment went bearish, the market fear/pullback was short lived and continued higher
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