As semiconductor stocks slump, one AI-adjacent sector is thriving - and these are the stocks to buy there

By Jamie Chisholm

Another way to exploit the AI evolution is available to investors

Robotics stocks are in vogue.

Early action on Wall Street shows stocks ending the week under severe pressure. And once again it appears to be concerns about valuations attached to the build-out of artificial intelligence that are doing the damage, with the semiconductor sector leading the retreat.

Rotating away from erstwhile AI darlings has been in vogue of late. Defensive plays like consumer staples XLP and healthcare XLV are becoming popular again. Bank stocks XLF have benefited from a batch of good earnings.

But according to research firm Bespoke Investment Group, there's an AI-adjacent theme that investors should be considering right now: robotics.

In a note that published Thursday, Bespoke observes that interest in the category is building fast. "Google search terms for robotics and related terms including components have begun to rise exponentially in the past year, and especially in the past few months," they say.

The focus comes as consumers and investors hear much more about robotics, such as news of Tesla (TSLA) pivoting a factory toward the production of its Optimus robot, and the unveiling of household products such as 1X's NEO servant.

"Apart from the flashiness of humanoid robots, the growth in robotics thanks in part to AI developments has been material," says Bespoke. It notes that Japanese machine orders for industrial robots have grown 24.5% in the past year - one of the fastest increases on record.

Companies are jostling for stakes in the robotics sector. For example, this week Hyundai Motor (KR:005380) said it would purchase SoftBank's (JP:9984) stake in Boston Dynamics, the U.S. group famous for videos of somewhat freaky robot dogs.

Bespoke splits the robotics theme into two baskets: one for companies with actual robotics or automation products as lines of business and, second, picks-and-shovels companies that produce critical components or systems.

To be included in the baskets, stocks must have market capitalizations of more than $1 billion and trade with liquid U.S. listings. The equal-weighted baskets have done well year-over-year, though the robotics-and-automation basket has pulled back this year.

Bespoke accepts that its baskets don't include a large number of companies that are involved with robotics on the Chinese, South Korean or Japanese exchanges.

The two cohorts are too big to list here in full, but here are the top 10 by market cap in the Bespoke Robotics & Automation Basket:

 
Company          Ticker  Robotics 
Alphabet         GOOGL   Waymo robotaxi and robotics AI research 
Amazon           AMZN    Operates over 1 million warehouse robots 
Tesla            TSLA    Developing Optimus humanoid robot 
ABB              ABBNY   Global industrial robot and automation maker 
Deere            DE      Autonomous tractors and farm equipment 
Intuitive Surg.  ISRG    Makes da Vinci robotic surgical systems. 
Stryker          SYK     Robotic-arm orthopedic surgery systems 
Medtronic        MDT     Hugo and Mazor surgical robot systems. 
Honeywell        HON     Warehouse automation and robotics systems 
Teradyne         TER     Universal Robots cobots and MiR mobile robot 

And here's the top 10 by market cap of the Robotics & Automation Picks & Shovels Basket:

 
Company          Ticker  Robotics 
Nvidia           NVDA    Leading robotics compute and software 
AMD              AMD     Compute chips used in robotics, edge AI 
Texas Ins.       TXN     Chips for factory automation motor control 
Siemens          SIEGY   Factory automation and robotics control 
Qualcomm         QCOM    Makes edge-AI chips for robots and drones. 
Analog Devices   ADI     Sensing chips for industrial robot motion. 
Schneider Elec.  SBGSY   Lexium robotics and automation components 
Parker-Hannifin  PH      Actuation, hydraulics for automation, robotics 
Infineon         IFNNY   Supplies power chips for robot motor control 
Emerson Elec.    EMR     Process, discrete automation control systems 

The markets

U.S. stock-indices SPX DJIA COMP are down sharply at the opening bell on Wall Street as Treasury yields BX:TMUBMUSD10Y also fall. The dollar index DXY is a little changed, as oil futures (CL.1) rise and gold futures (GC00) trade around $3,972 an ounce.

 
Key asset performance                                                Last       5d      1m      YTD     1y 
S&P 500                                                              7533.77    -0.13%  0.44%   10.05%  19.63% 
Nasdaq Composite                                                     25,881.95  -1.24%  -2.40%  11.36%  23.92% 
10-year Treasury                                                     4.533      -2.90   7.30    36.10   11.00 
Gold                                                                 4002.2     -3.07%  -4.09%  -7.62%  19.28% 
Oil                                                                  80.52      12.60%  6.62%   40.25%  21.94% 
Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

Netflix shares (NFLX) slumped after the streaming giant reported mixed quarterly results and said it would publish viewership data less frequently.

SpaceX's stock (SPCX) fell further below its $135 IPO price after a Starship rocket liftoff was aborted.

Federal Reserve Vice Chair Phillip Jefferson suggested the central bank may need to hike rates if inflation doesn't cool soon.

Intuitive Surgical's stock (ISRG) dropped sharply after the robotic-surgery group presented earnings and gave poorly received guidance.

There were 1.427 million housing starts in the U.S. in June, up from 1.199 million in May. U.S. industrial production rose just 0.1% in June compared to the month before, below forecasts for 0.2% growth.

The preliminary reading of the July consumer-sentiment survey will be released at 10 a.m.

President Donald Trump again claimed widespread interference in the 2020 election, which he lost to Joe Biden, and cast doubt on the integrity of the U.S. voting system ahead of the midterm elections.

The sky was the limit for turning offices into apartments - until some columns buckled.

The chart

Light-blue line is the S&P 500. Red line is Japanese investments in U.S. and dark-blue line is South Korean stock holdings in U.S.

A selloff in the South Korean stock market KR:180721 is about more than sentiment toward the global semiconductor sector. It emerged this week that approximately 320,000 to 360,000 trading accounts were fully liquidated by brokers, according to Goldman Sachs, following sharp falls by the likes of Samsung (KR:005930) and SK Hynix (KR:000660). The problem for Wall Street is that - as the chart from Michael Kramer at Mott Capital Management shows - a lot of South Korean investment has been moving into U.S. stocks, and this flow is likely to be under pressure.

Top tickers

Here were the most active stock-market ticker symbols on MarketWatch as of 6 a.m. Eastern.

 
Ticker  Security name 
SPCX    SpaceX 
NVDA    Nvidia 
MU      Micron Technology 
TSLA    Tesla 
NFLX    Netflix 
TSM     Taiwan Semiconductor Manufacturing 
AMD     Advanced Micro Devices 
MSFT    Microsoft 
AAPL    Apple 
SNDK    Sandisk 

-Jamie Chisholm

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(END) Dow Jones Newswires

07-17-26 0931ET