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If You Missed Nvidia, This is Even Bigger — Transcript

by Fin Tek · 3,317 words · 501 segments · language en · Watch on YouTube

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0:00If you had invested just $10,000 into
0:02Apple when the iPhone first launched in
0:042007, that would be worth over $1
0:07million today. If you had invested
0:09$10,000 into Nvidia with the
0:11breakthrough of ChatGPT 3 years ago,
0:13that would be worth over $100,000 today.
0:16Well, four big breakthroughs are now
0:18happening in robotics and it's already
0:20an area that we can invest in. Because
0:22industrial and humanoid robots can't
0:24just run on a data center GPU, it
0:26requires a whole physical hardware stack
0:28to be invented. is Curran Francis and I
0:31have worked as a solution architect
0:33implementing emerging technologies at
0:35Fortune 500 companies for the past
0:37decade and I have never seen
0:38back-to-back breakthroughs this big. So,
0:41let me show you what is happening and
0:43how I plan to invest in it. Starting
0:45with our first stock.
0:47This is the Novanta Denali servo drive.
0:50It is small enough to fit inside a robot
0:52joint and it controls the electricity
0:55that makes that joint move. So, a
0:57robot's computer will tell a joint how
0:59it should move. The servo then sends
1:01power to the motor. An encoder measures
1:04where the shaft actually went and then
1:06the drive adjust the power again. This
1:08is the closed feedback loop that allows
1:10a computer or an AI to turn a command
1:13into a consistent action. It's how we
1:15connect the digital to the physical
1:17world. And Novanta specializes in these
1:20types of robotics components and it's
1:22the first part of our robotics map that
1:24will touch on all areas of the industry.
1:26But, they also sell force sensors and
1:28tools for the ends of robotic arms.
1:30Meaning, they act as a supplier to the
1:33entire physical stack for robotic
1:35movement. And here's why that matters
1:36for investors. This is a chart of the
1:38total number of operational industrial
1:41robotics stock as of 2024, which we can
1:44see was more than three times the number
1:46from just 10 years earlier. These are
1:48not future promises of advanced humanoid
1:50robots, these are real industrial robots
1:53that are being used in factories and
1:55manufacturing today. Although, we will
1:57see some of those others later on,
1:59because today most robots aren't doing
2:02your dishes for you. They're being used
2:03in tasks like medicine or domestic
2:06applications like vacuums or lawnmowers
2:08or logistics and automotive. And it's
2:10these boring robots that offer the most
2:12potential for Novanta's future. Because
2:14the big question for Novanta is how many
2:17of these robotics components can they
2:19supply each time a robot maker adds a
2:22new moving joint. They're very focused
2:24on the area that they know best. And
2:26based on the growth of the servo drive
2:28market, which is expected to pass 3 and
2:301/2 billion dollars per year by 2035
2:33with a big boom in demand coming from
2:35Chinese robots, where China is now the
2:38biggest buyer of both industrial and
2:40humanoid robots in the world. US
2:42companies are starting to compete more.
2:44So, that's the story of this pick and
2:46shovels robotics supplier, but now let's
2:48take a look at how well the numbers back
2:51that story up. And after that, we need
2:52to look at two big risks that anyone
2:55investing in this company needs to know
2:57about. So, Novanta is growing pretty
2:59quickly. They expect revenue to increase
3:0121% in their next quarter with solid net
3:04income and very solid operating cash
3:06flow in their most recent quarter. The
3:08company is listed at 16% undervalued
3:11across 12 different valuation metrics,
3:13but I think that this chart is the most
3:16revealing one for this company. This is
3:18a chart of their revenue by segment. So,
3:20in 2023, they broke that down into
3:23medical, precision medicine and
3:24manufacturing, and robotics and
3:26automation. But today, they've merged
3:28that into two segments, medical and
3:30automation, with the company coming in
3:32just shy of 1 billion dollars in revenue
3:34last year. And recently, they have
3:37doubled down on the medical side. In
3:39July 2026, the company announced that
3:41they had acquired Riverpoint Medical for
3:43around 20% of their total value. It was
3:46a big investment. And with this
3:48investment, we also see the first big
3:50risk to any robotics investors here.
3:53See, this now brings Novanta's medical
3:55revenue to around 60% of their total
3:57because while Riverpoint does make
3:59medical devices, it's more like sutures
4:02and headlamps than super high-tech
4:04robotics equipment. So, this has almost
4:06taken the company from a robotic
4:08supplier that specializes in medicine to
4:11almost a medical supplier that is also
4:14good at automation. And look, the
4:15medical robot market is expected to grow
4:18like crazy, more than doubling next 5
4:20years. But this move does make them less
4:23of a pure robotics play. But one other
4:25chart we should look at is their revenue
4:27from different countries because we can
4:29see pretty clearly revenue from China is
4:31actually not climbing nearly as quickly
4:33as some other countries despite how big
4:36that market is. And this next chart
4:38really shows us why. It shows that China
4:40has been reducing their imports of both
4:42robots and robotic parts, especially
4:45their US imports, while they're
4:46developing their own internal robotics
4:49tech, which ties in with the second and
4:51I think broader risk here, which is that
4:53Novanta is a relatively small company.
4:56They're only worth around $5 billion
4:58today. So, there's always the risk that
5:00a bigger competitor from China or Japan
5:03or even the US could step in and steal
5:06their market share. So, the company is
5:08well positioned for growth, but while
5:10their medical robotic side has some
5:12regulatory lock-in, their industrial
5:14motion segment lacks what Warren Buffett
5:17might call a strong moat with increasing
5:20Chinese competition. So, for me, I like
5:22the stock at today's prices, but if
5:24their automation business doesn't grow
5:26faster than the medical side over the
5:29next 2 years, I would probably sell to
5:31redeploy into a more pure play robotic
5:34stock. Maybe like this next stock on our
5:36list, which also sells across the
5:38robotics market, but it goes one level
5:40deeper, selling the chips that robot
5:42makers need. And the best part, this is
5:44still a $6 billion company, so it's
5:47under the radar. And after that, we'll
5:49look at some other robotics stocks,
5:50including my current biggest robotics
5:52holding. So, researching robotics stocks
5:54and trying to distill all the
5:56information down into a 20-minute video
5:58can be a lot to keep track of. So, I
6:00usually use my notes off my laptop
6:02screen, but today I'm not because all
6:05those notes are right here. This video
6:07is sponsored by Even Realities, and
6:09these are the Even G2 smart glasses and
6:12the R1 smart ring. The G2 looks like
6:14regular eyewear, but inside there's a
6:16dual 3D floating display that can put
6:19useful information directly into your
6:20line of sight, like the script that I'm
6:22reading right now. You can also use it
6:24for real-time transcription or even
6:26translation of a conversation, or you
6:28can track relevant stocks directly
6:30within your field of view. So, I can use
6:32voice commands or touch the R1 directly
6:34to navigate, or I can use the R1 ring to
6:37scroll through information or tap to
6:39select without needing to reach for my
6:40phone or a second screen. There's no
6:42camera, so you can wear it wherever, and
6:44you get a heads-up display that comes
6:46with you. But, what I thought was really
6:47cool is with the Even Hub, you can now
6:49build your own tools for these using
6:51traditional coding or even AI agents.
6:54There's a whole developer platform and a
6:56fairly active Discord community building
6:58some cool stuff. So, I love that these
6:59are not trying to be a workstation
7:01replacement or some kind of spy glasses.
7:03They work with or without a
7:05prescription. I'm using a prescription
7:06that you can use as a second screen
7:09anywhere you're going. So, you can keep
7:10relevant context in view without
7:12constantly pulling up a separate device.
7:14And you can check out the Even G2
7:16glasses as well as the R1 smart ring
7:18using the link in the description. So,
7:20thank you Even Realities for sponsoring
7:22this video and supporting the channel.
7:23We can only make videos like this with
7:25supporters like Even Realities. So, you
7:27can check them out using the link below,
7:29and I'll keep on using these. And now,
7:31let's move on to our second robotics
7:33stock.
7:34>> [music]
7:34>> Our next stock operates one level
7:36deeper, developing the chip layer of the
7:39robotic stack. Look at the hands on this
7:41humanoid. Allegro isn't selling the
7:43robot, they're selling the multiple
7:46chips that control each aspect of its
7:48movement. See, advanced robots don't
7:50operate like a single brain making
7:52decisions. Instead, some intelligence is
7:55offloaded to edge chips that control one
7:58aspect of a robot. And our next stock,
8:00Allegro MicroSystems, specializes in
8:02these chips. So, you have all these
8:04sensors. One to measure how much a motor
8:07has turned, a current sensor for
8:09electricity through the motor, or a
8:11driver controlling power to it. Each of
8:13those different functions requires a
8:15chip to run it. And we're not talking AI
8:17GPUs here, we're talking core real-time
8:20sensing and motor reflexes that are
8:22offloaded to specialized edge silicon.
8:25That is Allegro's specialty, which I
8:27like because it's an area of the market
8:29that Nvidia investors aren't even
8:31looking at yet. And unlike the
8:33trillion-dollar AI stocks, this company
8:35hasn't yet seen a big run-up in value.
8:38So, it may offer better upside at
8:40today's prices. So, here's why the stock
8:42is interesting as an investor. This
8:44company talks a lot about potential
8:46markets in their earnings. Electric
8:48cars, where they've operated for years
8:49and have a track record, industrial
8:51robots, and now even data centers with
8:54like fan controllers. But this slide
8:56really summarizes the growth potential
8:58for this stock. It's three different
9:00automation markets, and Allegro
9:02estimates that they can sell around $5
9:05in chips per household robot, $55 for
9:08factory robots, and up to $150 worth of
9:11chips in humanoid robots. And so, as we
9:13see the number of robot joints increase,
9:16whether by Google, Boston Dynamics, or
9:18Tesla, more complex use cases make
9:21Allegro more money as they get paid per
9:24joint, regardless of who actually wins
9:26the robot wars. That sounds a lot more
9:28ominous than it should, but that's the
9:29first principle story, and there's some
9:31early signs that it seems to be working.
9:33Allegro reported design wins with large
9:36robotics customers in China and North
9:38America in its latest investor
9:40presentation with sales in their
9:41industrial business up 59% in the past
9:44year. But a design win is not the same
9:47thing as a sale and this is still a
9:49relatively small part of the overall
9:51company. This chart shows Allegro's
9:53revenue by market and today 69% of their
9:56revenue comes from automotive and out of
9:59the remainder we know that data centers
10:01make up 17% of their revenue. So what's
10:03left over for chips going into robotic
10:06limbs is still a very small part of the
10:08business. But it's also part that's
10:10growing very quickly and here is why I
10:12like the stock and then after that we'll
10:14also look at the biggest risk that
10:16investors need to watch for here. So
10:18their current business of selling to
10:19automotive makers and data centers puts
10:21them at a reasonable valuation. Not
10:24cheap, not expensive. But they have this
10:26whole stack of expertise building chips
10:29for cars and they are saying they can
10:31carry that over into other robots too
10:33because cars are basically wheeled
10:36robots driven by a controller steering
10:38wheel. So there's almost this hidden
10:39business growing inside the company
10:42which the market may not be fully
10:44pricing in. Which if anyone has been
10:45watching since my early Palantir
10:47investment days is one of my favorite
10:49types of companies to invest in. Hidden
10:51accelerating growth. But the stock is
10:53not without risks and the biggest one is
10:56that they're unproven in the broader
10:58robotics market. So a bet here is really
11:00buying their future growth and not the
11:03current business. This is especially
11:05risky given how cyclical the automobile
11:07market can be. So there may be some
11:09trips up and down and up again in this
11:11stock if you hold long-term which is how
11:14you get in early on a stock but it's
11:16also more risky than just buying an ETF
11:18which I'll also cover some relevant
11:20robotics ETFs later in the video. But
11:22let's move from the super small more
11:24speculative robot plays and into one of
11:27the most proven robotics companies in
11:29the market but whose stock is actually
11:31down around 30% in the past year.
11:34>> [music]
11:35>> So, whenever someone sends me a clip of
11:37a backflipping Chinese robot that knows
11:39kung fu, I point them to this stock
11:42because flashy demos don't generate free
11:44cash flow, but this company shifts
11:46billions of dollars in goods every year
11:48and they're producing real value for
11:50their customers today. And there are
11:52some big updates on this stock since I
11:54last covered them. So, Symbiotic is a
11:56warehouse automation company. They build
11:58the robots, package movers. They've even
12:00designed custom warehouses where the
12:02entire building acts like one giant
12:05robot system with lights out automation,
12:07meaning no humans even go to some areas.
12:09And they operate across the entire
12:11supply chain for businesses. They are an
12:13absolute leader in their field and
12:15you'll probably recognize a lot of their
12:17customers. They represent an actual
12:19robotics company in a robotics map. They
12:22provide end value to a customer. But,
12:24when I first covered this stock 9 months
12:26ago, I said this, but I'm waiting to
12:28invest until I see how the Walmart deal
12:31will play out over the next year. I
12:32decided not to invest then because the
12:34whole investment thesis centered around
12:37one big deal that Symbiotic had signed
12:39with Walmart worth up to $5 billion in
12:42backlog. Walmart being one of the
12:44largest warehouse users in the entire
12:46world. But, 9 months later, we can now
12:48see just how well that deal has turned
12:50out as well as one acquisition that
12:52changes the math on this stock. And of
12:54course, we'll also look at the biggest
12:56risks that investors could face here.
12:58So, Walmart originally sold its advanced
13:01systems and robotics business to
13:03Symbiotic and then hired Symbiotic to
13:05develop automated pick up and delivery
13:07systems for its stores. This was a
13:09really big deal, but it was also
13:11contingent on Symbiotic hitting certain
13:13milestones to get paid out. In total,
13:15Symbiotic had a backlog of 22 and a half
13:18billion dollars, but a lot of that
13:20revenue would only appear if they could
13:23actually execute. And now that they
13:24actually have more track record under
13:26their belt, things seem to be working
13:28out pretty well so far. Their modular
13:30distribution centers, which are designed
13:32to be expanded over time, have helped
13:34drive revenue of over $700 million in
13:37their latest quarter, up 22% in the past
13:40year. And with this growth, the company
13:42has finally achieved consistent
13:44profitability. Now, Symbotic didn't
13:46break out how much of this comes from
13:48Walmart specifically, but it does show
13:50that their numbers are headed in the
13:52right direction. But there was some even
13:53bigger news this quarter. In July 2026,
13:56Symbotic acquired Arms Innovation, a
13:58software platform for coordinating
14:01people, robots, and tasks across a
14:03warehouse. So, it gets all the data in
14:05one place and then acts as the digital
14:07brain for all the physical systems in a
14:09warehouse. But what matters to investors
14:11here is it offers a way for Symbotic to
14:14get paid twice. Once for the expensive
14:16warehouse setup and again as recurring
14:19software support, plus any ad-hoc
14:21support that customers need. And we know
14:23Wall Street tends to pay more for
14:25recurring revenue. Now, Symbotic
14:26software revenue was already up 57% in
14:30the past year, not even including this
14:32acquisition, but that was a relatively
14:34small part of the business before. After
14:36the acquisition, this higher margin part
14:38of the business seems like it's going to
14:40become a very core part of Symbotic's
14:42value going forward. So, we'll have to
14:44wait and see, but the company's stock
14:46price has fallen into a much more
14:48reasonable valuation range, and that's
14:50not even factoring in the potential
14:52growth from software in its acquisition.
14:55But there is still one capital R risk
14:57that investors in this company need to
14:59watch out for, and that is Walmart.
15:01Symbotic's 10-Q report showed a
15:04mysterious customer A that now accounts
15:06for 90.5%
15:08of their revenue, up from 83.8%
15:11of their revenue last year. Given that
15:13we know Walmart was planning to spend
15:15more with Symbotic as they hit certain
15:17targets, it's pretty clear that
15:18Symbotic's entire business is dependent
15:21on maintaining Walmart as their biggest
15:23customer. So, a lot of growth potential,
15:25but also some serious concentration risk
15:28if Walmart were to ever leave. Although,
15:29Walmart does also own part of the
15:31company, which helps mitigate that a
15:33little bit.
15:34But, for our next stock, I want to look
15:36at a different kind of robot supplier,
15:38one that doesn't need a specific robot
15:40maker to win. And at the end, I will
15:42also share my overall top pick from the
15:44companies I've covered. Now, I really
15:46wanted to include an ETF and a software
15:49company on this list to really round out
15:51the robotics market, but I decided to
15:53keep the video more focused on under the
15:55radar companies. That said, a big part
15:57of the robotics map is the software
16:00stack and machine learning models
16:02enabled by companies like Nvidia and
16:04trained by companies like Google. And
16:06one way to get exposure to the entire
16:08robotic space is through an ETF like the
16:11VanEck Robotics ETF, ticker symbol I
16:13bought, which includes stocks like
16:15Nvidia, EMR, and ASML, chip and
16:17automation companies that are some of
16:19the biggest in the world. That ETF also
16:21includes Novanta and Symbotic, and it
16:23also holds some Japanese and even
16:25limited Chinese exposure. But, that is a
16:28pretty small ETF, so for a slightly
16:30higher expense ratio, there's also the
16:32Robo ETF, which focuses on smaller cap
16:35automation stocks. Neither is my
16:37favorite ETF in the world, there's just
16:39really limited options in the robotics
16:41market, but they are a more diversified
16:43way to play this. You could also just
16:44buy Google, which tends to follow every
16:46tech trend. But, okay, let's get to
16:48stock number one on our countdown, and
16:50then I'll share my top stock pick from
16:52the list that we've looked at.
16:54One area where we have seen robot sales
16:56surge is surgical robots, and our next
16:59stock specializes in the motion control
17:01systems that power this, but they also
17:04power this, and even this. Regal Rexnord
17:08is the last piece of our map, and they
17:09are part of the broader power and
17:11industrial motion market. Around 31% of
17:15of sales came from their automation and
17:17motion control business or $478 million
17:20this quarter with a big chunk of that
17:22coming from their 2020 acquisition of
17:25Ultra Industrial Motion for $5 billion
17:28around half of their value today. This
17:30company sits at a pretty reasonable
17:32price and while they are mostly an
17:34industrial company, they have
17:36substantial upside from automation. So
17:38looking at all the stocks we've covered,
17:40if I had to pick one winner, I would
17:41probably go with Allegro just cuz I
17:44really like the hidden automation growth
17:46that's built into their business. But
17:48every stock has potential upside and
17:50potential risk. So let me know what is
17:52your top pick below. And if you found
17:53this video valuable, consider
17:55subscribing or you can check out another
17:57video on this channel which I'll link
17:59right right here. Click this button
18:01right here.

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