Physical AI Emerges as the Next Major Industrial Growth Wave

Barclays Research today released a new Impact Series report The Future of Work: AI Gets Physical, highlighting humanoid robots as the next frontier for artificial intelligence. Designed in human form, these robots are moving from labs into real-world settings, with the potential to reshape sectors from manufacturing to healthcare.

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Humanoid Robot

Breakthroughs in AI reasoning, actuator technology and battery systems have cut production costs 30-fold over the past decade, paving the way for commercial adoption. As ageing populations and labour shortages intensify, humanoids could take on repetitive, physically demanding tasks — augmenting rather than replacing human workers in labour-intensive industries.

Barclays Research estimates the global humanoid robotics market, currently $2–3 billion, could reach $200 billion by 2035 under the most optimistic scenarios. Europe may hold a competitive edge in the supply chain thanks to its expertise in precision engineering and automotive manufacturing, particularly in actuator systems, which account for around half of production costs. China is also emerging as a major force, accounting for the majority of new humanoid robot models and rapidly scaling its innovation and manufacturing footprint.

"Humanoid robots represent a structural shift in automation," said Zornitsa Todorova, Head of Thematic FICC Research Barclays. "As they move from concept to commercial reality, the implications for labour markets and industrial strategy are profound."

Barclays' Impact Series uses data-driven analysis to explore economic, demographic and disruptive changes affecting markets, sectors and society at large. The key findings of today's report include:

Why now: Demographic pressures and labour shortages are creating demand for humanoids in manufacturing, logistics, healthcare and other sectors struggling to fill critical roles.
The ‘three Bs': Advances in brains (software), brawn (physical motion capabilities), and batteries are driving cost declines. Actuators — the robotic "muscles" — are the largest cost component, accounting for roughly 50% of humanoid production costs.
Industrial overlap: Humanoids share complexity with automotive manufacturing, offering Europe a natural advantage.
Investment opportunity: As humanoid production scales, physical AI is emerging as the next major industrial theme — shifting value creation from software to hardware. This opens new upside for actuator makers, precision‑component suppliers and automation leaders who were largely absent from AI's first wave.

Read the full report here.

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Claudia Gilbert-Allen

claudia.gilbertallen@barclays.com

+442077732064

Barclays Research Finds Humanoid Robotics On Track to Become a $200 Billion Market by 2035