In recent months, we at FGEN have been thinking a lot more about Elon Musk’s ambitious vision for humanoid robots. We believe the world may be at the threshold of one of the most consequential transformations of our time: the emergence of a true robotics economy. The implications are so vast and multi-faceted that we plan to explore this topic through multiple insight pieces, each examining different aspects of this revolution and its investment implications.
In this insight piece we examine the market psychology around robotics and the fundamental economic incentives that could drive adoption. In our second piece in the series, we will look at hardware-software convergence - how the fusion of physical robotics with AI is creating entirely new possibilities. And in our third insight, we look to analyze the geopolitical dynamics of the US-China rivalry and how it is shaping the robotics industry. Finally, our final piece will examine how AI agents will transform robotics from simple automation to autonomous decision-making systems.
Let's begin with market psychology and the fundamental economic drivers that make this moment unique. Tesla's recent announcements about their Optimus robot program provide an interesting lens through which to examine both market sentiment and economic reality.
The headlines are attention-grabbing: production targets of 10,000 robots in 2025, scaling to 500,000 within three years, and an ambitious vision of robots outnumbering humans by 2040. These headlines have led to either unbridled enthusiasm or deep skepticism, depending on who you talk to. But as is often the case when it comes to the bleeding-edge of technology, the investment implications are much more nuanced.
To analyze this, one must get past the “either-or” mindset – either believing that "Robots will revolutionize the economy. Tesla is leading the charge. Buy Tesla stock." Or conversely thinking: "These production targets are unrealistic. Musk always overpromises. Avoid the hype."
Instead, we ask what does the world look like if Musk is even partially right about robots outnumbering humans by 2040? What are the non-obvious implications? And where is the current investment sentiment on this?
The price point Musk is targeting – around $20,000 to $25,000 per robot – is fascinating. It's roughly equivalent to a year's salary for many service industry workers. This creates an interesting economic inflection point:
There is a further aspect to this - that widespread robot adoption will lead to "abundance for all" where goods and services become essentially free. Again, while this is initially dismissed by some, it is worth considering. If production costs approach zero due to robotic labor, the value of raw materials and energy could become the primary constraint on production, as opposed to labor costs. Intellectual property and brand value will become even more crucial, as manufacturing advantages disappear.
The consensus view amongst investors seems to be that we're in a typical tech hype cycle. But perhaps we are actually seeing something different. Most technological revolutions started with high costs and limited applications before gradually becoming ubiquitous (think personal computers or the Tesla Model S). Humanoid robots, if viable at the lower price point, would actually flip this pattern
They would be economically viable for mass deployment almost immediately.
We believe that there are two key questions that investors should be asking. First, are we underestimating the speed of adoption? History shows that technological change often happens faster than expected once economic incentives align. At $25,000 per unit, the incentives for rapid adoption would be powerful.
Second, where does the value accrue in a world of "free" goods and services? Traditional metrics like profit margins may become less relevant and the winners might be those who can create scarcity through innovation, brand value, or control of key resources.
The greatest opportunities often arise when transformation is dismissed as hype, but the economic incentives for adoption are compelling. We appear to be at such a juncture with humanoid robots.
