Techies are throwing billions at robots; the 'hardware tourists' are piling in

For decades, hardware was a hard sell in Silicon Valley. Now investors are pouring tens of billions into machines that can do things in the real world.

A Goldilocks set of conditions has made robotics one of tech's hottest bets. As investors look beyond chatbots to the next frontier in AI, cheaper hardware, smarter AI models, labor shortages, and competition with China are fueling interest in machines capable of performing physical work.

Robotics and physical AI companies raised $33.4 billion globally in the first half of this year alone, according to PitchBook data. That's already more than the $28.7 billion the sector raised in all of last year — and an astronomical rise from 2020, when funding came in at just under $5 billion.

Investors are writing billion-dollar checks to fund both the machines and the AI brains behind them. Defense company Anduril raised $5 billion in May, co-led by Thrive Capital and Andreessen Horowitz. Autonomous shipbuilder Saronic raised $1.75 billion in March in a round led by Kleiner Perkins. Skild AI, which builds software to control different kinds of robots, raised $1.4 billion in January in a round led by SoftBank. Physical Intelligence, which is also building an AI model to command robots, raised about $1 billion in May, co-led by Leopold Aschenbrenner's Situational Awareness and Lux Capital.

"This is off the charts," Ken Goldberg, a UC Berkeley robotics professor and cofounder of warehouse robotics startup Ambi Robotics, told Business Insider. "In my 45 years in this field, this is the most funding and energy and interest in robotics that I've ever seen."

This is the first installment of Robonomics, Business Insider's new series on the rise of robots and their impact on business, jobs, and everyday life. We'll go inside factories and warehouses where humans work alongside robots, meet the founders, investors, and workers driving the boom, and examine how the technology is reshaping industries from manufacturing to defense. We'll also ask how close robots are to becoming part of everyday life, and what is still standing in their way.

The prize is enormous. Unlike software, which is largely confined to work done on screens, robotics companies are going after physical labor, from factories and construction sites to robot butlers in every home. Nvidia CEO Jensen Huang, who popularized the term "physical AI," has described robotics as the "technology industry's first opportunity to address a $50 trillion industry that has largely been void of technology until now." Many Nvidia veterans have launched their own robotics startups.

But investors are pricing companies as though the robot revolution has already arrived. Startups still in research and development command multibillion-dollar valuations, often with little revenue and few deployments to show for it. Humanoid maker Figure AI, for example, secured a $39 billion valuation last year, even as its deployments remain limited to small factory pilots.

"Robotics is going to happen, and a lot of money will still be lost," said Sarah Guo, founder of the venture firm Conviction, which is an investor in robotics startups Sunday Robotics and Watney. "Both things are true."

From not to hot

From industrial arms assembling electronics to Roombas cleaning floors, robots have long been part of everyday life.

What venture investors struggled to see was how to make money from them. Building robots required expensive hardware, factories, and supply chains, often to produce machines that could perform just one narrow task. Why fund that when you could back a college dropout building the next viral app?

Guo used to tell fellow investors that robotics was a good way to lose a lot of money over many years. "The models didn't work," she said. "Every robot was a brittle, single-purpose system hand-built for one task."

Ajay Agarwal, a partner at Bain Capital Ventures, was among the few investors willing to bet on robotics during the internet era. In 2004, he backed Kiva Systems, which pioneered warehouse automation with fleets of mobile robots that brought products directly to human workers.

Bain led every successive funding round because Kiva was "not able to raise money on Sand Hill Road," Agarwal told Business Insider. By the time Amazon bought it for $775 million in 2012, Bain was its only institutional investor.

More than two decades later, AI has changed the calculation. Advances in machine learning are helping robots perceive their surroundings, make decisions, and adapt to new tasks, raising hopes that companies can build more versatile machines instead of engineering a different robot for every job. Cheaper computing and hardware are also making the economics more attractive.

Some of Silicon Valley's biggest names are now chasing that vision. Former Uber CEO Travis Kalanick's Atoms raised $1.7 billion in July to pursue automation in food, mining, and transportation. Rivian CEO RJ Scaringe's Mind Robotics has raised $900 million this year, while former Cruise CEO Kyle Vogt's home robotics startup, The Bot Company, has raised at least $300 million.

Big Tech and AI labs, too, are joining the rush. OpenAI has advertised robotics jobs with base salaries reaching $500,000 a year. Meta acquired robotics startup Assured Robot Intelligence in May and is testing robots in its data centers. Google has invested in humanoid maker Apptronik, which is also working with DeepMind to develop AI models for robots. Elon Musk, meanwhile, is staking Tesla's future on the Optimus humanoid.

Some venture firms are setting aside dedicated capital for robotics. In August, Andreessen Horowitz raised $1.1 billion for "Machine Age," its first fund focused on the physical infrastructure behind AI, including robotics.

The gold rush

For longtime robotics investors, alarm bells are ringing. Industry veterans whisper about "hardware tourists" piling into robotics deals — investors drawn by AI hype who underestimate how difficult it is to build machines that work reliably in the real world. There is precedent for caution. Venture firms poured billions into autonomous vehicles in the 2010s, only to see startups fold or consolidate as self-driving technology proved harder and more expensive to commercialize than expected. Years later, only a handful of deep-pocketed players have managed to bring robotaxis to the public.

Robotics faces its own formidable obstacles. Unlike large language models trained on vast amounts of internet text and images, robots lack a comparable trove of data showing them how to act in the physical world. Dozens of startups are now scrambling to collect it, but nobody knows how much will be enough. And even smarter AI won't eliminate the challenges of manufacturing, maintaining, and deploying expensive hardware.

"The most difficult part of physical AI is the physical part," said Charly Mwangi, a partner at VC firm Eclipse who has backed The Bot Company and robotics startup Genesis AI. "The next few years are going to be really, really hard for the robotics industry as companies go from the lab to deployments."

Some of the most speculative robotics bets are attracting the biggest checks. Humanoids and general-purpose robot models were the two fastest-growing areas of robotics investment last year, according to venture firm F-Prime. "You cannot raise money on demos forever," said Sanjay Aggarwal, an F-Prime partner and coauthor of the firm's annual robotics report. "I would personally be surprised if all these companies independently exist two or three years from now."

There are signs that some startups are becoming real businesses. Field AI, which is building an AI "brain" that works across robots, has crossed $100 million in revenue and customer contracts from more than 30 customers, including construction firms, data center operators, and defense companies, Business Insider previously reported. Skild AI said last month that it had reached $100 million in annual recurring revenue from more than 60 customers. Its projects include robots assembling Nvidia's Blackwell chips with Foxconn and kitchen pilots with Mitsui, a Japanese conglomerate.

Believers see robotics on the cusp of a breakthrough that could put machines to work in nearly every corner of the economy. Brad Porter, the former head of Amazon Robotics who now runs workplace robotics startup Cobot, says the field could be nine to 18 months away from major advances in dexterous manipulation — the ability of robots to handle objects with the ease of human hands.

"When I think of a 'ChatGPT moment' for robotics, it is cracking dexterous manipulation," Porter said. "Then there will be a Cambrian explosion of robots."

The question is whether these breakthroughs will arrive quickly enough to justify the money pouring in.

At Business Insider's Growth Mode event this month, Menlo Ventures partner Matt Murphy singled out robotics among the fields attracting enormous amounts of financing "before they're really showing traction." Abundant funding, he warned, can make startups "sloppy."

For investors, he said, that means "a lot more opportunity to have a really big crater."

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