Jensen Huang is the CEO of Nvidia (NVDA 4.45%)a company whose chips power most artificial intelligence (AI) systems. At a technology conference last year, Huang made a bold statement: “The next wave of AI is here. Robotics, powered by physical AI, will revolutionize the industry.”
Elon Musk, CEO of Tesla (TSLA 8.22%)made a related prediction last year: “I think that by 2040, there will probably be more humanoid robots than there are people.”
With this in mind, Citigroup Analysts estimate that sales of humanoid robots will reach $14 billion by 2030, $1.1 trillion by 2040, and $7 trillion by 2050. And some Wall Street experts see huge returns on the horizon for Nvidia and Tesla shareholders:
- Equity analyst Beth Kindig believes that Nvidia could be a $10 trillion company by 2030. This implies about 185% upside from its current market value of $3.5 trillion. If that happens, Nvidia shares will return 19% annually over the next six years.
- Billionaire fund manager Ron Baron says Tesla could be a $5 trillion company within a decade. That implies about 315% upside from its current market value of $1.2 trillion. If it works, Tesla shares will return 15% annually over the next 10 years.
Here’s what investors need to know about Nvidia and Tesla.
1. Nvidia
Nvidia is best known for its graphics processing units (GPUs), chips that accelerate complex data center workloads, such as running artificial intelligence (AI) applications. Nvidia accounts for 98% of data center GPU sales, and its dominance is largely due to its ecosystem of software development tools called CUDA.
Nvidia Isaac is a robot development platform built on CUDA. It includes code libraries and preformed templates that help engineers create robotics applications in three distinct use cases: industrial manipulator arms, autonomous mobile robots, and humanoid robots. Isaac also includes a simulation engine that allows developers to generate synthetic training data and test robotics models.
Beyond the data center, Nvidia Jetson systems are integrated chips that bring together GPUs, central processing units (CPUs), memory and storage to form the third and final layer of the robotics computing stack. To elaborate, GPU-accelerated servers provide the supercomputing infrastructure needed to train AI models, Isaac provides the tools needed to build robotics applications, and Jetson systems provide the computing power that autonomous robots need to function.
Nvidia’s GPUs power most generative AI systems, so investors have reason to believe that these chips will also be the foundation of most physical AI systems. While generative AI can create new content, physical AI can understand and interact with the physical world. Put differently, physical AI is the technology that will power autonomous robots.
Wall Street expects Nvidia’s adjusted earnings to rise 52% annually through the 2026 fiscal year, which ends in January 2026. That makes the current valuation of 55 times adjusted earnings seem very reasonable. Patient investors should feel comfortable buying a small position in this stock today.
2. Tesla
Tesla is best known as the market leader in electric cars, but CEO Elon Musk told analysts earlier this year: “We have to be thought of as an AI or robotics company.” Tesla designed the supercomputing hardware that powers its Full Self-Driving software and applied that hardware to a humanoid robot called Optimus.
Musk recently said that Optimus is “the most advanced humanoid robot by a long shot.” Importantly, while he sees a tremendous upside in self-driving technology, Musk believes that Optimus will ultimately be more valuable than every other Tesla product combined. He also speculated that Optimus could drive Tesla’s market value to $25 trillion.
Musk expects “several thousand Optimus robots” to work in Tesla factories this year and says the company will start selling Optimus to customers as production ramps in 2026. Musk has made big promises on unrealistic timelines in the past , because investors should not consider those projects. set in stone. However, he tends to keep his promises eventually.
Wall Street expects Tesla’s adjusted earnings to grow 27% annually through 2025. That consensus makes the current valuation of 170 times adjusted earnings seem absurd. But patient investors who believe Tesla can monetize self-driving technology and humanoid robots should absolutely have a position. Start with a few stocks today and add more when the stock price drops.