Weekly Update: AI Is Getting a Body: The Next Big Rotation
Good evening, and welcome to this week’s edition of Stealth Trades!
Three weeks ago, I told you I was watching the sectors closely to see where money rotated next.
I think I found it.
If you have been with me through this AI bull market, you know the pattern by now. The money never sits still. It rotates from one theme to the next, always hunting the next bottleneck in the global AI build-out.
First, it was the semiconductors – Nvidia, AMD, Broadcom.
Then nuclear and power. Remember the runs in OKLO and SMR?
Then came the infrastructure names – data centers, cooling, power equipment.
And most recently, memory and storage – Micron, Sandisk, and Seagate going vertical, some up 1,000%+.
Every rotation followed the same logic. The market finds the next choke point in the AI expansion, capital floods in, and the stocks go parabolic before most investors even know the theme exists.
So where does the money go next?
I believe the answer is robotics. This is the next logical layer – “physical AI.”
Here’s the simple version of the thesis…
Until now, AI has been trapped in the digital world. It writes emails. It writes code. It builds spreadsheets and slide decks. Impressive stuff – but it all happens behind a screen.
That is changing right now. AI is getting a body. And the money is starting to move.
THE CATALYSTS ARE STACKING UP
Look at what has happened in just the last six weeks:
- June 24 – Agility Robotics, the company whose Digit humanoid is already working in real warehouses, announced it is going public through a $2.5 billion SPAC merger with Churchill Capital Corp XI (ticker CCXI, becoming AGLT). It will be the first pure-play humanoid robot company on a US exchange.
- July 3 – Chinese regulators approved Unitree Robotics’ $618 million IPO in Shanghai. Unitree reportedly did about $235 million in 2025 revenue – up 335% year-over-year – with gross margins near 60%. And unlike most of this space, it is already profitable. Humanoids are now over half its revenue.
- Tesla – The last Model S rolled off the Fremont line in May. That line is being converted to build the Optimus V3 humanoid, with production slated to begin in the next few weeks. Musk’s stated ambition is an eventual 1 million units per year.
- Figure AI – The startup raised over $1 billion at a $39 billion valuation to build humanoids for commercial labor. That’s a bigger valuation than many S&P 500 companies.
- Amazon – Now has over 1 million robots working in its warehouses. Robots are on pace to outnumber human workers in its fulfillment centers.
- Nvidia – Jensen Huang opened the year at CES declaring that the “ChatGPT moment for physical AI” is coming. Nvidia is pouring resources into its Isaac GR00T robot brains and Jetson Thor robot computers and has called robotics a $40 trillion opportunity.
Morgan Stanley projects humanoid robots will become a $5 trillion annual market by 2050, with 1 billion units deployed.
Now, I take 25-year forecasts with a big grain of salt. Nobody can model 2050.
But even if they are off by 80%, that is still a trillion-dollar market being built from almost nothing today.
THE SMART MONEY IS ALREADY MOVING
Here is the part most investors have missed. While everyone was staring at the memory stocks, the robot supply chain quietly started going vertical.
Vishay Precision Group (VPG), which makes the strain gauges and force sensors that let a robot feel pressure in its joints, ran 269%.
Teradyne (TER) – the parent company of Universal Robots that tests the AI chips going into robots is up 139% this year.
Ouster (OUST) has more than doubled as investors scramble for exposure to their digital lidar – the eyes of the machines.
Nvidia, on the other hand, has gone nowhere – up less than 5% on the year.
And this is typical of what we see early in a rotation. The picks-and-shovels names move first, quietly, while the headlines are still focused on the last theme. It is the same pattern we saw in memory a year ago.
FOLLOW THE BOTTLENECK
Regular readers know my favorite question in this AI cycle: where is the next bottleneck?
For robotics, the answer is the hardware itself.
Actuators – the motorized joints that make a robot move – are 40-60% of the cost of a humanoid. The precision gears inside them come from a tiny handful of suppliers, mostly in Japan. The high-torque motors require rare-earth magnets. Even precision ball bearings, which I’m learning is a fairly niche market, are expected to see explosive demand growth.
This is an area I will be focusing heavily on in the third quarter. And I will keep you updated on what I find.
Best wishes for your trading,
