What will drive the humanoid sector in 2H25?

Morgan Stanley highlights that China's humanoid robot sector faces a critical test in the second half of 2024, as investor focus shifts from ambitious targets to tangible commercial adoption, following a 6% pullback from March to July. Future growth hinges on integrators proving commercial value and ramping up orders, with key catalysts including Tesla's upcoming earnings call and major AI/Robot conferences. Morgan Stanley assigns a 60% probability to a base-case scenario where new launches and modest adoption updates could lift the China humanoid value chain by 2-5%, contingent on successful hardware and software advancements and the transition of prototypes into real-world deployments.

Analysis

According to Morgan Stanley, China's humanoid robot sector is facing a critical inflection point in the second half of the year, as investor sentiment shifts from speculative ambition to the need for tangible commercial adoption. This transition follows a period of cooling, evidenced by a 6% decline in the China humanoid value chain from March to July, driven by key integrators trimming 2025 guidance and a stall in major technological breakthroughs. The sector's future trajectory is now contingent on companies converting prototypes into real-world orders and deployments. Morgan Stanley projects a base-case scenario with a 60% probability of a 2-5% lift for the value chain, predicated on a steady flow of new product launches and modest adoption updates. Key near-term catalysts that will heavily influence market sentiment include Tesla's earnings call on July 23, the World AI Conference, and the World Robot Conference in August, which is expected to feature over 100 new product debuts. Progress will also be measured by hardware and software advancements, particularly in robot reducers, materials like PEEK, and visual-language-action (VLA) models from industry leaders. Notably, Morgan Stanley has expanded its coverage to include six new component and partner firms, such as Hesai (HSAI), signaling the importance of the entire supply ecosystem in enabling the next phase of growth.

Key Decisions for Investors

• Investors should closely monitor near-term catalysts, including Tesla's upcoming earnings and the World Robot Conference in August, for concrete evidence of commercial orders and product viability.
• Consider exposure across the entire value chain, not just robot integrators, by evaluating key component suppliers like Hesai (HSAI) that are critical for hardware and software advancements.
• It is prudent to align expectations with Morgan Stanley's cautious base-case outlook of a modest 2-5% sector lift, recognizing that future gains are dependent on tangible adoption rather than speculative hype.
• Focus on tracking specific technological milestones in visual-language-action (VLA) models and hardware efficiency, as these are the primary enablers for the sector's transition from prototype to profitable deployment.