Growth stocks: the $7trn opportunity hiding in plain sight

When it comes to growth stocks, it can pay to back companies that operate in industries that have huge market growth potential. It doesn’t always pay off but think about those who identified online shopping as a promising, high-growth industry 20 years ago and invested $5,000 in Amazon – that investment would now be worth about $480,000.

Wondering what the next blockbuster growth industry is? It may be hiding in plain sight…

This industry could be worth trillions

Today, there’s an exciting new growth industry that’s beginning to emerge and that’s humanoid robots. These are robots that are designed to resemble the human body in shape, appearance, and movement, and can do everything from household tasks (e.g., cleaning, gardening) to specialised labour (e.g., child care, elderly care, taking orders and serving food at a restaurant).

Now, this technology obviously sounds futuristic. And it is – it’s not like we’re going to see these robots everywhere in the next 12 months.

But make no mistake – they’re coming. Right now, there are tons of companies developing them – including Tesla, XPeng, Figure AI, UBTECH, and Agility Robotics – and the technology is very impressive.

I’ll point out that while production could be set to ramp up in the next year or two, I’m not expecting the industry to take off straight away. High costs, battery life, production constraints, and concerns around safety could all be barriers to entry in the short term.

Yet, in the long run, the potential looks immense. According to Citi Global Insights, the market for humanoids could be worth a whopping $7trn by 2050.

How to invest

When it comes to investing in humanoid robots, there are three main types of stocks. These are:

• Companies that provide solutions for the brains of the robots
• Companies that provide technology for the bodies
• Companies that put everything together and produce the finished product

I reckon that most investors will probably opt for companies in the final category (like Tesla). Because, with these companies, it’s easier to see the progress that’s being made (e.g., Tesla’s Optimus robot).

But I believe that investing in component or software makers could be a smarter approach. A lot of these companies could do well no matter which producers have success.

A stock to check out

One company that I think may do well as the industry grows is Nvidia (NASDAQ: NVDA). It’s very active on the ‘physical AI’ front and has a range of solutions in relation to humanoid robots including:

• DGX systems: these provide the computing power needed to train robotics AI models
• Isaac GR00T: this is a comprehensive platform designed to help humanoids understand language and learn skills
• Jetson Thor: this is a high-performance computing platform designed to act as the brain for humanoids and essentially runs a robot’s perception, planning, and control systems

Ultimately, this company has an end-to-end platform that can bring humanoids to life.

Now, I’m not saying that investors should rush out and buy Nvidia shares today – there could be better buying opportunities in the months ahead. Today, its fortunes are mainly linked to generative AI spending and concerns over a drop off in this area could lead to share price volatility.

I think the tech stock is definitely one to consider for the humanoid robotics boom, however. In my view, it has a ton of long-term potential despite its huge market cap today.

The post Growth stocks: the $7trn opportunity hiding in plain sight appeared first on The Motley Fool UK.

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Edward Sheldon has positions in Amazon and Nvidia. The Motley Fool UK has recommended Amazon, Tesla, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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