The AI boom, exemplified by companies like OpenAI and the success of generative text models like ChatGPT, was rapid, but I see challenges ahead. The AI field is now highly competitive, and these text-based AI companies might find it hard to maintain their dazzling growth. Instead, I recommend growth investors focus some of their attention elsewhere. After all, Wayne Gretzky (and presumably many others) suggested that skating to where the puck is headed is the ultimate goal.
Thus, focusing on robotics, particularly industrial and warehouse robotics, is where I want to spend some time. This sector has fewer competitors than conversational AI but offers substantial growth opportunities due to the rising demand for automation solutions.
Here are three robotics stocks I think should have a place in your portfolio. It’s worth noting that a few of these companies do have business models tied to AI, so there is some overlap here for those interested.
Intuitive Surgical (ISRG)
Intuitive Surgical (NASDAQ:ISRG) is revolutionizing healthcare with robotic-assisted surgery. The company’s flagship product, the da Vinci Surgical System, acts as a high-tech surgical partner, enabling precise and minimally invasive procedures, reducing pain, scarring and recovery times.
Intuitive Surgical is poised to profit from the rising demand for minimally invasive care. While ISRG stock has been flat year-to-date, I think this reality presents a promising accumulation opportunity. Furthermore, Intuitive’s global market potential, particularly in emerging markets, offers room for growth. With $7.13 billion in cash and cash equivalents, Intuitive has a strong financial footing, allowing for continued R&D spend and global growth.
Moreover, Intuitive recently reported a number of positive metrics in its Q2 results. Its da Vinci procedures increased by 22% year-over-year, and the overall installed base of the da Vinci surgical systems grew by 13% year-over-year to 8,042. This is one key product to keep an eye on as it drives a significant portion of the company’s results.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) faced a recent setback when the U.S. government imposed restrictions on AI chip exports to China, affecting some of its chips. These restrictions aim to control access to computing power and slow China’s development of advanced AI models that could have military applications. Nvidia’s stock briefly dipped, but given its dominant position in AI chips, it’s likely a minor hiccup for the company.
Nvidia’s robust revenue and earnings growth have improved its valuation, with a forward price-earnings ratio of 31 times. While not cheap, it could be considered reasonable when factoring in the company’s verticals. As so many investors know, Nvidia is more than an AI play. The company’s high-performance chips are used in almost every growth sector. Accordingly, robotics is no different.
This year, NVDA stock has seen significant gains, up nearly 200%. Over five years, these gains are more like 750% — some incredible performance. Nvidia’s dominant position in high-performance computing positions it well for further market share expansion in core areas such as AI and robotics. While some stocks offer lower valuations, few can match Nvidia’s growth rates. The company’s upcoming earnings in November will offer more insight into its financial performance.
Rockwell Automation (ROK)
Rockwell Automation (NYSE:ROK) shares dipped around 22% from their July peak, creating an attractive opportunity for investors. The company, another leader in robotics, is well-positioned to benefit from strong automation demand, with consensus estimates forecasting 15% sales growth this year.
Despite some moderation in customer orders last quarter, management remains confident in the underlying robust demand, thanks to Rockwell’s diverse end-market exposure and innovative products. ROK stock trades at a 22-times forward earnings premium, reflecting its strong growth prospects. Analysts generally expect 15% annual earnings growth over the next three years, with Rockwell expected to outperform competitors in the industrial automation sector.
In addition to strong financial performance, the company has formed an exclusive partnership with Infinitum to develop low-voltage drive tech, promoting energy savings and sustainability. Rockwell also launched the Stratix 5200 switch series, providing enhanced options for machine builders and industrial clients. That makes ROK stock a top choice among robotics stocks and one I’m keeping an eye on right now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
