Nvidia: Figure AI Robots Could Provide A Further Tailwind For The Stock
Contributor since 2019 / 2276 Followers
Summary:
- US companies are reshoring manufacturing due to rising Chinese wages, IP concerns, and supply chain resilience, with humanoid robots like Figure AI playing a pivotal role.
- Nvidia Corporation’s investment in Figure AI, leveraging its GPUs and AI technology, positions it to benefit from the growing humanoid robot market, projected to reach $66 billion by 2032.
- Figure AI’s robots, already ahead of Tesla’s Optimus, are being tested in BMW’s plant, showcasing advanced capabilities like dexterity, extended battery life, and AI-driven communication.
- Significant market growth and Nvidia’s technological integration with Figure AI could lead to substantial revenue and capital appreciation, boosting Nvidia’s stock price.
Thinkhubstudio
Preamble
Since the 1980s, US companies have been offshoring their manufacturing base to various parts of the globe with the enthusiasm of a banker selling Mortgage-Backed Securities to the Greeks. China, with its abundant and skilled workforce, became a prime destination for these offshoring efforts. Currently, China is a dominant force in global manufacturing, supplying components for a vast range of products, including, believe it or not, 41% of the bits necessary to produce US armaments.
However, recent years have witnessed a growing trend of reshoring. Companies seek to bring production back to the US due to factors such as rising Chinese wages, concerns about intellectual property protection, and a desire for greater supply chain resilience.
There are numerous news articles that proclaim that US companies are engaging reverse gear and are planning to re shore production facilities to the US. Indeed, the latest report from the Reshoring Initiative highlights plans by many businesses are now well underway. Although, the report also notes that: “As government subsidies run out, new reshoring and FDI (Foreign Direct Investment) announcements are slowing.” To counteract this slowdown, the research document emphasizes the importance of reducing US manufacturing costs rather than subsidizing industries.
This is where humanoid robots hold the promise of playing a pivotal role in reshoring since their running costs presumed to be far lower than the cost of employing people. Needless to say, there are various companies developing humanoid robots to fill roles within manufacturing, Tesla (TSLA) with their Optimus product, for instance. Another is a robot being developed by Figure AI whose investors and collaborators include Microsoft (MSFT), OpenAI and Nvidia Corporation (NASDAQ:NVDA).
Nvidia’s Investment In Figure AI
Figure AI is a rapidly emerging robotics company aiming to revolutionize the field with its advanced humanoid robots. The development team boasts top talent from industry leaders such as Boston Dynamics, Tesla, and Google, bringing expertise in areas such as robotic locomotion, artificial intelligence, and advanced manufacturing.
In February, Figure AI secured a massive $675 million in Series B funding, a testament to the immense potential of their technology. This investment, led by the key collaborators mentioned, will fuel the company’s ambitious plans for research, development, and commercialization of their humanoid robots. Figure AI is focused on developing general-purpose humanoid robots capable of performing a wide range of tasks both in industry and in a home setting. With their cutting-edge technology and strong financial backing, Figure AI is poised to become a key player in the rapidly growing field of humanoid robotics.
The exact size of Nvidia’s investment in Figure AI is not known, although, personally, I believe it is a sizeable proportion of the total, but not more than $200 million. This is based on the data given in the company’s Form 10 Q for the period. To quote:
“Our non-marketable equity securities are recorded in long-term other assets on our Condensed Consolidated Balance Sheets and valued under the measurement alternative. The carrying value of our non-marketable equity securities totalled $1.5 billion and $1.3 billion as of April 28, 2024 and January 28, 2024, respectively.”
Also, as far as I can figure out, there were only a total of 8 investors, so, I would guesstimate that Nvidia contributed around $100 million.
In the short time the company has been around, its robots have stolen the march on the big name in the industry, Tesla’s Optimus.
Figure AI Robots
In January, Figure announced that it had partnered with BMW to introduce their humanoid robots into their South Carolina plant. The plan was to identify suitable tasks for the robots and then gradually deploy them on the factory floor.
In August, some pretty impressive videos have emerged that demonstrate how effective Figure’s products are in an industrial setting. The videos show Figure 02 robots adeptly handling complex assembly tasks, which require a considerable degree of dexterity. In addition, reports claim that Figure’s robots boast an extended battery life and sensory capabilities. Seemingly, BMW is enthusiastic about the potential of the humanoid robots to address labor shortages and improve productivity.
To quote from the article: “The robot features embodied AI, trained in part with partner OpenAI, to enable speech-to-speech communication with humans, and to perform tasks like obstacle avoidance, and perception, along with task and path planning.” Truly, the stuff of science fiction.
Given that Mr. Musk reportedly promised that, “Tesla would move into ‘limited production’ of Optimus in 2025 and test out humanoid robots in its own factories next year (2025),” it would appear that Figure has a head start over Optimus.
What’s In It For Nvidia
Well, if Figure takes off, there will be a considerable capital appreciation of Nvidia’s previously noted investment. Moreover, Nvidia’s technology is an integral part of the company’s robots.
Figure’s new robot relies heavily on Nvidia technology for its advanced capabilities. It reportedly uses Nvidia GPUs for autonomous operation, with a second onboard Nvidia RTX GPU module for significantly faster AI processing. Since high-end RTX GPUs can cost several thousand dollars each, but if we assume a conservative estimate of $2,000 per module, this could account for $4,000 of the total cost.
Then there is the cost of licensing Omniverse, which is subscription-based and is $4,500 per GPU per year.
The robot’s development was accelerated by Nvidia’s Isaac Sim, which allowed Figure to use synthetic data for training and testing. Furthermore, Figure leverages Nvidia H100 GPUs to train the robot’s conversational AI models in partnership with OpenAI.
So, back of the envelope calculation, we may guess that each Figure robot would have around $10,000 of Nvidia technology. This means a revenue of $1 billion for every 100,000 robots sold.
Nvidia’s comprehensive robotics stack, from cloud training to edge deployment, plays a crucial role in Figure’s goal of commercializing humanoid robots for both industrial and consumer use. Figure is also a member of the Nvidia Inception program and the Nvidia Humanoid Robot Developer Program, providing them with access to cutting-edge tools and resources.
Of course, the multi-million-dollar question is how big and how fast will the market for these robots grow.
Market Size
Given the potential, it is unsurprising that several reports have suggested that the market for humanoid robots is set to surge. One from Fortune Business Insights claims that:
“The global humanoid robot market size was valued at USD 2.43 billion in 2023 and is projected to grow from USD 3.28 billion in 2024 to USD 66.0 billion by 2032, exhibiting a CAGR of 45.5% during the forecast period.”
This substantial projected growth is further corroborated by other independent analyses. For instance, another forecasts total revenue of $13.25 billion by 2029 and also suggests a CAGR of circa 45%.
To put this into perspective, let’s assume that Nvidia did indeed invest $100 million into Figure and that this sum increases in value by a CAGR of 45% over 10 years. Under these conditions, after 10 years, Nvidia’s investment would be around $10 billion.
Risks To Thesis
To begin with, the astronomical growth predictions for the humanoid robot market — from $2.43 billion in 2023 to $66 billion by 2032 appear quite optimistic.
The primary barriers to such rapid expansion are technological and economic. Current humanoid robots, despite impressive demonstrations, have yet to be proven reliable and cost-effective for industrial deployment. Figure AI and others have shown promising prototypes, but transforming these into widespread, economically viable solutions may well require overcoming significant challenges.
Next, we have Tesla’s Optimus product line. It may be that Tesla produces a robot at low cost, which is conceivable given the company’s experience in manufacturing. The company has also been working on their chips for AI, so another possible obstacle for Nvidia.
Summary
Figure AI, through collaboration with Nvidia, ChatGPT and Microsoft have produced humanoid robots that show exceptional promise. These robots have the potential to revolutionize the field of humanoid robotics and are poised to become a key player, thus offering Nvidia the opportunity to hoist revenues to even greater heights. In addition, there will be a considerable capital appreciation of Nvidia’s investment.
Under these circumstances, given that we are on the cusp of humanoid robots entering the workplace, and society at large, there is an added tailwind to Nvidia’s stock price.
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