Morgan Stanley's latest research report, released on December 19, highlights that while the humanoid robot market will continue its upward momentum in 2026, investors should be wary of the significant gap between "dancing robots" and those with scalable practical value.
The bank predicts that short-term market hype will persist, but the industry may soon face a correction due to challenges in physical AI development, manufacturing hurdles, and a shakeout among startups.
Key market catalysts include the launch of Tesla Motors' Optimus Gen 3 and potential announcements from tech giants entering the robotics sector in early 2026. Reports suggest the US government is preparing new policies to accelerate domestic robotics development, with Commerce Secretary Lutnick and the Trump administration reportedly going "all-in" to support the industry through measures like tax incentives and private investment incentives.
Despite US policy efforts, Morgan Stanley emphasizes that the gap between China and the US in this field is widening at an accelerating pace. China continues to solidify its lead with its undisputed manufacturing advantage, and "embodied intelligence" has been listed as one of six breakthrough industries in China's 15th Five-Year Plan. However, Li Chao, spokesperson for China's National Development and Reform Commission, warned of potential "bubble" risks, noting that while capital is flooding in, proven real-world applications remain scarce.
Market performance-wise, Morgan Stanley's Humanoid 100 Index has risen 25% since its inception in February 2025, outperforming the S&P 500, MSCI Europe, and MSCI China indices. As global robotics firms transition from labs to real-world applications, winners and laggards will become more distinct, with capital and talent concentrating in companies demonstrating strong in-house AI capabilities and manufacturing expertise.
**Short-Term Hype vs. Technological Reality** Analysts caution that while enthusiasm for humanoid robots will surge in waves in 2026, investors should focus on the bigger picture. Short-term drivers—such as Tesla Motors' Optimus Gen 3 launch, hardware and AI breakthroughs, and big tech's commitments to physical AI—will fuel market sentiment. However, the industry may later face a "reset" as challenges in developing physical AI models, manufacturing bottlenecks, and startup consolidation become apparent.
Investors are advised to remain cautious about claims of "autonomy." Achieving full autonomy in humanoid robots is extremely difficult, and unless explicitly labeled as autonomous, demonstrations should be assumed to involve teleoperation—a necessary step toward true autonomy but not a red flag, as 2026 is still too early to assume fully autonomous capabilities.
**Tech Giants Enter the Fray & US Policy Shift** 2026 will be a pivotal year not just for startups but also for tech giants seeking new growth avenues. Morgan Stanley expects at least one major tech company or AI lab (e.g., Meta, Google, Apple, Amazon, OpenAI) to formally announce robotics plans, as they look to expand their total addressable market (TAM) to justify AI-driven valuations.
On the policy front, reports indicate the US government is considering executive actions to accelerate robotics development, potentially through tax subsidies, procurement, or regulatory changes—mirroring past efforts in rare earths and drones to spur private investment.
**China's Manufacturing Edge & Regulatory Warnings** Despite increased US policy support, China continues to leverage its manufacturing dominance to maintain its lead. Nearly every major Chinese automotive and consumer electronics firm is now linked to humanoid or AI-powered robotics in some capacity.
However, regulators are monitoring signs of overheating. Li Chao noted the need to balance growth with potential "bubbles," as over 150 companies have entered the space despite limited proven applications. Further guidelines are expected under China's 15th Five-Year Plan.
**Funding Trends & Corporate Updates** The private market remains active, with Physical Intelligence (backed by Alphabet's CapitalG) raising $600 million at a $5.6 billion valuation, while Skild AI is in talks with SoftBank and Nvidia for over $1 billion at a $14 billion valuation. Deep Robotics, a rival to Unitree, secured ~$70 million.
On the product front, Tesla Motors showcased an upgraded Optimus prototype with articulated toes and lab-tested running capabilities, setting the stage for Gen 3 in early 2026. Midea Group unveiled the six-armed "super humanoid" MIRO U, targeting a 30% boost in factory output. Norway's 1X partnered with EQT Ventures to deliver 10,000 NEO robots for industrial use, marking a shift from household to warehouse applications.
**Long-Term Market Projections** Morgan Stanley maintains bullish long-term forecasts, projecting global humanoid robot revenue to reach $7.5 trillion annually by 2050. Assuming a 6-year replacement cycle and declining average selling prices (ASPs), adoption could hit 24.4 million units by 2036 and 1 billion by 2050.
In high-income countries, ASPs may drop from $200,000 in 2024 to ~$75,000 by 2050, while middle- and low-income countries could see prices fall from ~$50,000 to $21,000—driving global adoption.
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