Physical AI Gains Traction, NVIDIA Calls It ‘Next Wave’

Physical AI—artificial intelligence embedded in robotics and machines operating in the physical world—is no longer a concept of the future. Companies like NVIDIA (NVDA), ABB (ABBN SW), and Rockwell Automation (ROK) are already leveraging this technology to build autonomous robots, drones, and industrial automation systems. Investors are taking notice, with AI-focused equity and crypto markets seeing bullish momentum.

Unlike traditional AI systems, which operate in digital environments, Physical AI bridges the gap between software and hardware. It powers machines that can navigate, adapt, and make decisions in real-world environments. This creates opportunities across manufacturing, logistics, defense, and mobility. During NVIDIA’s Q1 FY2027 earnings call on June 1, 2026, CEO Jensen Huang described Physical AI as the “next major wave” beyond generative AI, highlighting its transformative potential.

Financial markets are increasingly reflecting this shift. AI-related equities have gained attention, with notable players like ABB allocating significant resources to robotics and automation. As of May 19, 2026, ABB represented 5.81% of VanEck’s thematic investment fund holdings, while NVIDIA and Rockwell Automation comprised 5.05% and 3.60%, respectively. Japan’s Fanuc Corp (6954 JP), a leader in industrial robotics, accounted for another 3.24%. These positions underscore the growing institutional focus on Physical AI.

In parallel, the AI crypto sector has crossed a $25 billion market cap as of June 2026, driven by enthusiasm for decentralized physical infrastructure networks (DePIN). Tokens like Humanity (H) surged 65% to record highs earlier this month, fueled by broader optimism in AI investments.

The technical hurdles for Physical AI are substantial. Unlike software-based AI, it must manage real-time sensor inputs, motor control, and energy efficiency in unpredictable environments. This requires advancements in edge computing, robotics hardware, and embodied learning algorithms. Companies capable of solving these challenges are likely to dominate the next era of AI-driven industrial innovation.

For investors, Physical AI offers a unique opportunity to capitalize on the convergence of AI software with robotics and automation. This trend is expected to drive growth across multiple sectors, including manufacturing, defense, and logistics. However, it comes with risks—ranging from technological hurdles to geopolitical factors affecting supply chains.

Looking ahead, the evolution of Physical AI will likely accelerate as companies like NVIDIA, ABB, and others continue to innovate. Thematic investors should watch for further developments in robotics, industrial automation, and AI-enabled decentralized networks. With AI already reshaping industries, Physical AI could redefine the boundaries of machine intelligence in the years to come.

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