\ \ The AI boom of the early 2020s transformed software, data centers, and silicon as billions flowed into GPUs, power…

\ \ The AI boom of the early 2020s transformed software, data centers, and silicon as billions flowed into GPUs, power infrastructure, and cloud computing. Physical AI is emerging as a new frontier now that these elements are in place. Humanoid robots, autonomous systems, and embodied intelligence are moving beyond science fiction demos into real use in factories and supply chains. According to PitchBook’s Q1 2026 Robotics & Physical AI VC Trends report, the sector had its best quarter ever, raising $16.3 billion across 492 deals. This funding includes significant contracts in early exits, defense, and robotics as a service, showing the progress in commercial deployment. \ The data-driven momentum Though being relatively limited during times of economic uncertainty, robotics investment grew steadily over the years. Robotics venture capital funding reached a peak of $14.7 billion in 2021, then dropped to about $5-7 billion annually from 2023 to 2024, before increasing again in 2025. The situation changed dramatically starting in 2025, and by quarter one 2026, the numbers hit never-before-seen levels. Feeling this growth was multiple factors. AI models have advanced to a point where large language models and vision systems can provide reliable perception, planning, and control in physical robots. Foundation models trained on video and simulation data lessen the need for task-specific programming. This results in faster development cycles and better generalization to tasks. Also, hardware prices have come down as supply chains for actuators, sensors, batteries, and edge compute parts in smartphones and electric vehicles are well-established. At the same time, there is real commercial demand driven by labour shortages in manufacturing, logistics and eldercare. Early tests at companies like BMW and several automotive suppliers are starting to deliver measurable results. For example, Figure AI’s humanoid robots completed a ten-month pilot at BMW’s Spartanburg plant, helping to produce over 30,000 BMW X3 vehicles. Defense and government priorities have also fueled funding for autonomous systems due to ongoing geopolitical tensions. PitchBook’s data highlights this change. Deal value jumped in late 2025 and surged in quarter one 2026, while deal counts showed a similar upward trend. This pattern mirrors the earlier AI infrastructure growth but has now broadened into physical applications. \ Supply chain overlaps and investment landscape The robotics opportunity closely aligns with already existing AI infrastructure. Many technologies designed for data centers transfer easily to embodied AI. Onboard memory and storage needs for real-time inference create more demand for high-bandwidth memory and advanced NAND. Photonics, sensors and other components are enabling robot vision systems, including FMCW LiDAR. Chips for edge computing, power semiconductors and efficient cooling solutions can move from large-scale environments to mobile platforms. Materials such as NdFeB permanent magnets, that are critical for robot joints annd motors, are gaining strategic importance China produces around 94% of global sintered permanent magnets , and an estimated 90% of NdFeB magnet production originates from China. Investors with existing AI positions can easily tap into robotics with this overlap. Hyperscalers such as Amazon leverage their warehouse automation expertise to extend into broader humanoid applications, while Tesla integrates its Optimus developments with existing AI and manufacturing capabilities. As a result, most accessible listed exposure today remains upstream in the supply chain or within diverse tech companies with internal robotics projects. Pure-play revenue at scale is still in the future, but component orders are already showing early signs as prototypes and initial production lines ramp up. \ The IPO horizon Several robotics companies are close to going public after years of private funding. Agility Robotics stands out as a top candidate for U.S. investors. In June 2026, the company announced a business combination with Churchill Capital Corp XI, valuing Agility at a $2.5 billion pre-money equity level and expected to generate over $620 million in gross proceeds. After the deal closes, the combined entity will trade as AGLT, becoming the first major U.S.-listed pure-play humanoid company with active commercial deployments. Its Digit robot has collaborated with partners like Schaeffler, GXO, and Toyota Motor Manufacturing Canada, with Amazon among its strategic investors. The facility in Salem, Oregon, is set for scaled production. Unitree has filed for a Shanghai IPO seeking $610 million , with reports suggesting a target valuation of $3 billion to $7 billion . Other Chinese companies are also eyeing Hong Kong listings. There are more private companies in the pipeline, suggesting there may be a cluster of IPOs from late 2026 and into 2027 as production milestones are reached. Market interest in these IPOs will be tested. The initial excitement may well be volatile, but the real value will come from whether these companies can prove the economics of deploying their solutions at scale in a cost-effective way. \ The Risks There are substantial technical and time risks. Meeting the requirements for reliable dexterity, sufficient battery life, safe operation around humans, and robust edge case handling will require a lot of engineering work, and may take longer than anticipated. Industry experts do not expect to see meaningful volumes produced until 2026, but rather between 2027 and 2030. Manufacturing factories and iterating on hardware is capital intensive, and that adds pressure: pre-profit companies that go public face dilution and execution risk. Geopolitical and competitive challenges add further complexity. Given China's strong position in production volume, the U.S. and the Western markets are concerned about security, data access, and supply chain dependence. Economics (such as a recession or poor early returns) could further slow progress if companies scale back robotics spending. Valuation discipline is also essential. High private valuations from big deals could be tested in public markets wanting to see revenue and margins. The counter-thesis is robotics could follow the path of other hyped technologies, a quick influx of capital followed by consolidation. Long-term success will likely go to companies that possess critical intellectual property, control essential components such as magnets or perception systems, or can manufacture at real scale. This environment calls for patient, multi-year capital allocation, not a focus on short-term gains. \ Investment Framework & Outlook Investors have several options for balancing their exposure across the robotics landscape. Upstream suppliers of sensors, magnets, edge computing and power have good potential. More stable exposure is found in established technology companies with robotics programs embedded within them. You can get targeted gains by selectively participating in pure-play IPOs or SPACs, but do this cautiously and know that volatility is expected. Broad thematic diversification through funds related to automation or robotics also manages overall risk. The effects are not limited to financial markets: humanoid systems can increase manufacturing productivity, improve logistics efficiencies, fortify defense capabilities, and reduce labor tensions in aging societies. By the end of the 2020s, fleets of robots could be as common a sight in factories as today’s conveyor belts. The digital underpinnings of AI are increasingly affecting the physical world of robotics. Venture investments are at all-time highs and production pilots are accelerating. 2026 and 2027 will be a critical period for validation. Investors positioned cleverly across the robotics spectrum stand to profit as physical AI evolves from prototypes to platforms. Robotics has moved from venture pitch decks to production lines, mirroring the same capital trends that built AI’s digital infrastructure a few years ago. This story was also published on my newsletter called Spyrigend . \n Tip Jar Enjoy the article? Consider leaving a tip to support my writing efforts. All donations are greatly appreciated! 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