Speaker A
AI is obviously the story of the market, but physical AI could actually be a massive growth driver over the next decade. We're not just talking about humanoid robots. There's a lot going on in warehouses and autonomous vehicles.
Explore why Garmin, Intuitive Surgical, and Joby Aviation are poised to lead the physical AI revolution in wearables, robotic surgery, and autonomous flight.
Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.
Generated from the transcript and can be wrong — check the timestamp.
Key Takeaways
- Physical AI extends beyond robots to include wearables, autonomous vehicles, and aviation technologies.
- Garmin’s diverse product and data ecosystem positions it well for future AI integration.
- Intuitive Surgical remains a leader in robotic surgery but requires careful valuation analysis.
- Joby Aviation represents a new frontier in urban air mobility with promising technology and partnerships.
- Investors should watch these companies for long-term growth potential in physical AI markets.
What the video covers
- Physical AI is emerging as a major growth driver beyond humanoid robots, impacting warehouses, autonomous vehicles, and wearables.
- Garmin is highlighted as a key player in physical AI with its smartwatches, aviation, marine devices, and unique data collection capabilities.
- Garmin’s data ecosystem powers platforms like Strava, giving it a strong competitive position in health and fitness wearables.
- Intuitive Surgical leads in robotic surgery with a significant installed base and a razor-and-blades business model, though its stock faces valuation challenges.
- The surgical robotics market is competitive, and the moat around Intuitive Surgical’s technology and training is questioned but still significant.
- Intuitive Surgical’s growth rate is solid but not explosive, making its current valuation a key consideration for investors.
- Joby Aviation is discussed as a promising company in the eVTOL (electric vertical takeoff and landing) aircraft space, with potential in urban air mobility.
- Joby’s technology aims to improve reliability and stability in urban air transport, with partnerships and market opportunities in the US and UAE.
- Physical AI companies face unique challenges such as hardware costs, regulatory hurdles, and market adoption timelines.
- The video encourages investors to consider these companies for their potential to dominate the physical AI landscape over the next decade.
Chapters
- 00:00Introduction to Physical AI and Market Potential
- 00:55Garmin’s Role in Wearables and Physical AI
- 02:17Garmin’s Business Model and Data Advantage
- 05:41Introduction to Intuitive Surgical and Robotic Surgery
- 07:09Intuitive Surgical’s Market Challenges and Valuation
- 10:02Growth Prospects and Competitive Moat of Intuitive Surgical
- 12:38Joby Aviation and the Future of eVTOL Aircraft
- 20:41Conclusion and Investment Considerations
Full Transcript — Download SRT & Markdown
Speaker A
Wanted to talk about this with Lou Whiteman and a few of our ideas, maybe a little bit off the reservation, things that aren't on your watch list yet in the world of physical AI. I want to start out here. One that I've been
Speaker A
thinking a lot about in the future of artificial intelligence and, you know, space connectivity. What sort of devices are we going to be using? What about one of the smartest, most expensive devices that millions of people are wearing
Speaker A
today? That's a Garmin watch. Garmin is a leader not only in smartwatches that regular people are wearing. Outdoors and fitness are kind of their two main areas. But they're also in most, well, smaller airplanes. They're in a lot of boats. If you go to, you know, if
Speaker A
you go look at the really nice boats, they've got a big Garmin thing on top. This is one of these companies that I think is just going to be the kind of wearable and always-on device that we're going to look back and go, "That was so
Speaker A
obvious that they were going to be a player in artificial intelligence." Whether it's talking to your wrist like Dick Tracy style or whether it's just being connected to your boat or your vehicle. They also have, you know,
Speaker A
infotainment systems that they're building for automakers. So much optionality in the future of physical artificial intelligence. I think Garmin is going to play a bigger role than we think.
Speaker A
I think you're right. And look, I didn't see this in the age of a smartwatch that they'd still be there.
Speaker A
And look, it's so dangerous as investors to assume they can pivot. And I think we need to give management a lot of credit. I think there's a lot of worlds where it did fall apart. The
Speaker A
story did fall apart because of smartwatches, because of new devices. So good on them for making it work. But yeah, you're right. This is a much bigger, better company than just casual watches. You mentioned the boats, the
Speaker A
airplanes. They've just found so many ways to make themselves useful. Again, to their credit, I don't think I would have bet on that. So, I do appreciate the fact that they were able to find what they're good at and where
Speaker A
that would be, where that would create value. The other thing to think about too with them is the data side.
Speaker A
They're collecting so much data whether you're looking at health, whether you're looking at... They have this device that actually goes around a horse's tail and collects data, that heart rate data and things like that about a horse. So,
Speaker A
there are so many areas that they can pull data that simply nobody else has.
Speaker A
And they're just really underappreciated for having that source of information that everybody wants, right?
Speaker A
Like your Apple Health wants to have that Garmin data. There was also a big kerfuffle with Strava.
Speaker A
You know, Strava is a very popular platform, but it's Garmin's data that drives Strava. And so, when they pulled Garmin data off of Strava, people went crazy because they would rather choose their Garmin watch than their Strava app. So, I think that's just a very
Speaker A
powerful position to be. It's also not anything strange if you're using AI and it's just sitting on your watch talking to your watch. It's not a new pair of glasses. It's not a pin. It's not a, you know, thing around your neck.
Speaker A
I just think this is much more compelling for wearables and the future of AI is these devices that are already there and a lot of us are already wearing Garmin watches.
Speaker A
I'm going to take just a quick second to tell you about Motley Fool's Epic Services. It's got everything you need to build a powerhouse portfolio minus the Wall Street stiffness. Premium stock picks, elite research tools, and battle-tested strategies. If you want
Speaker A
access to Motley Fool Epic, go to fool.com/epic-50. That's fool.com/epic-50. All right, you wanted to talk about a company that I never owned but have always watched from the sidelines and admired. That is Intuitive Surgical.
Speaker A
Yeah, and I mean, I love this company and I'm leaning into the... I wish I would have bought because I don't think I want to buy it today. But, I will talk about why. But look, Intuitive Surgical,
Speaker A
robotic surgery. We've seen it. It's real. And if you talk to anyone who has experienced this or just like you bring up the name of this company and if somebody, if some loved one has used
Speaker A
it, you will hear such stories. This is such a... It's very compelling. It's hard not to be intrigued by it. Up 350% in the last 10 years. It was up 600% just a year ago.
Speaker A
Yeah, I was going to say, it's in a pretty big drawdown about 44%, right? And part of that is, look, we don't think of healthcare as cyclical, but it is. Especially COVID was the biggest example where a lot of people
Speaker A
put off elective surgeries. But look, there's been a lot of reasons why maybe people haven't had healthcare that they had a year ago, different costs, things like that. So, surgery is a little cyclical and so it's a
Speaker A
bad patch. What I can't figure out though is, how big is this moat?
Speaker A
We've always heard about, you know, like look, surgeons train on their systems, that's a moat. Their systems are installed, that's a moat. I think to some extent that's true, but you know, hospitals are constantly refreshing equipment and a very small portion of
Speaker A
them still own it. You know, have anything right now. There are some big, big companies that have gotten into robotic surgery in a big way based on Intuitive's success. If I'm a surgeon and the hospital says, "We'll give you an extra 10 grand to learn this
Speaker A
too," I'm going to train on something else. So, I don't know what the moats are. The other thing I always hear about it is it's a razor and razor blade model and that is what makes it a success. You
Speaker A
not... You don't just buy the big system, but then for every surgery you do, you need components, you need to buy disposable parts. That's a great business and that's why I think it's a good stock. But, Travis, have you ever called Gillette a growth
Speaker A
stock? I don't think I have. So, you know, the razor razor blade, that makes me think they will stay in business, but I don't know if that's a compelling... I both love this company. I look at it and like, "Wow, it's much
Speaker A
cheaper than it used to be." I really, really wish I was sitting on those gains. I would have found it 10 years ago, and I'm sitting on it because I think I'd probably hold. I think it's probably a
Speaker A
market beater from here, but I don't know if it's a market destroyer anymore. So, I wish I would have found it earlier.
Speaker A
This is one of those companies that I think we need to look at the multiple.
Speaker A
And is the multiple a tailwind or a headwind? If you just look at their 10-year compound annual growth rate, as phenomenal as this business is, their 10-year annual growth rate is 15%.
Speaker A
That's a good growth rate, but it's not going to be up there with some of those really highly valued companies.
Speaker A
So, this is not a company that I necessarily want to pay 40 times earnings for, which is where it's trading today. 30 times on a forward basis.
Speaker A
But, that's where... Look, if we get to a point where we've talked about Adobe recently. We talked about The Trade Desk recently. If you ever get to the point with Intuitive Surgical, this is why I think this is one that's on my
Speaker A
watch list, and it's one that I'm keeping an eye on because if we see another leg down in the stock because investors are not impressed with the growth rate, and we get to a point where you do get those low teens, maybe even
Speaker A
single-digit forward price-to-earnings multiples, that's where this gets really compelling because I do think what you mentioned earlier is there's a moat around learning on a device, you know, learning that early in your career, you know, the same thing with
Speaker A
Graphic design schools, film schools are all using Adobe products. That makes it really sticky and really hard to disrupt. So, that's what makes it compelling, but yeah, that valuation is just really tough right now.
Speaker A
Yeah. Okay, the third stock that we wanted to talk about today is Joby Aviation. So, there are two major players in the EVTOL space, electric vertical takeoff and landies landing.
Speaker A
That is Joby Aviation and Archer Aviation. I think we're in agreement, Lou, that Archer Aviation wins the press release battle. They even announced this week that they have a new aircraft that they're going to be making with Anduril
Speaker A
to serve the military market. And there's a commercial version as well where you can just pack your stuff in an eVTOL aircraft and move it from point to point.
Speaker A
The problem is they also admitted they're not actually going to be flying commercial aircraft until 2028, hoping hoping by the LA Olympics.
Speaker A
Joby may have commercial operations this year. They're scaling the business. We sort of know what Joby is going to be. I wouldn't be surprised if a decade from now there are thousands of Joby aircraft in the air around cities all over the
Speaker A
world. You know, typically these are going to be flights under 50 miles, definitely under 100 under 100 miles, but you know, think around the New York area, around Los Angeles, Seattle.
Speaker A
That's where we're going to kind of start with some of these the UAE, they've got some deals as well.
Speaker A
But the potential future is in flying these aircraft without a human human driver. And I think that's where you get to some really exciting potential for this company and for the industry in general. That's one of the things that
Speaker A
Archer announced, but Joby's working on it as well. They made an acquisition a couple of years ago to be able to do this. And some of their initial flights have been autonomously flown.
Speaker A
So I think this is where there's where where misunderstanding the value of being the company that's actually going to get these things in the air. We're going to start with human drivers just like Waymo did. But eventually we're
Speaker A
going to pull those drivers out. It's going to maybe make room for an extra seat, maybe a little stuff to carry. I think a lot of potential here for Joby.
Speaker A
I think so. And the autonomous is so far away, it's hard to really figure out what that's going to be. But look, there is a real there there, and I think you're exactly right. Archer, the funny thing about it is Archer is so busy
Speaker A
yelling about how they're going to be all things for all people, it really makes you wonder if they are really set up well to be one thing for one group, and I think that's what Joby Yeah. The core market here, Travis, and it's hard
Speaker A
to define, but I think it's simple to define is is that everything you would do with a helicopter if helicopters weren't so darn dangerous. There's an expression in aerospace, a helicopter is a argument with physics. And that's basically kind of how it works, and
Speaker A
that's why you know, you're limited by weather, you're limited by so many things. But, imagine a more stable using the design to kind of just the wings to to stabilize. What could you do if it was more reliable, more stable? Uh some of
Speaker A
Joby's early customers are going to be Imagine right now, I'm near Atlanta. They Delta Airlines actually flies to Macon, Georgia, an hour and a half down the road just to pick up people to feed their international flights. What if you
Speaker A
could do that with a for a fraction of the cost with one of these things? There are just real applications to be used for. How far it goes, I think that's going to take time. I don't anticipate all any of the sci-fi for a while.
Speaker A
There's also the real risk of once they start actually making these things, we're going to find out that physical goods cost money to make. So, I think when the P&L sheet actually has profits and losses and actually has the
Speaker A
expenses, the the ongoing CapEx, this isn't like Facebook where you you write the software once and then you distribute it a trillion times for free.
Speaker A
Free time, you sell an airplane, you need to build the airplane. So, I'm kind of curious how the market reacts once they're out there and once we actually see the quarter-to-quarter results. But, I these are coming, and I think Joby
Speaker A
will be part a a big part of the success in this sector. Before the end of this year, I think they do need to answer some of those questions about what the business model really looks like cuz they've talked
Speaker A
about, you know, maybe we can sell these, maybe we'll have some sort of partnership where we help operate them, but we'll we'll we'll have an initial gross margin or maybe we'll just own all of them or a bunch of them in different
Speaker A
markets. So, there's lots of different ways that they could go, but we we don't know how much each one is going to cost.
Speaker A
I saw an interview a few years ago where we were talking about between 1 and 2 million dollars. That seems really really low.
Speaker A
Uh probably going to be more like 10 million dollars. I wouldn't be surprised if we if we see those kind of prices for some of these aircraft. So, lots of questions to be answered, but I do think you're right. There's a very
Speaker A
very compelling use case, especially for those short flights. The longer potential flights would be powered by hydrogen. That's something that they've tested. I think about 250 miles is what they've flown. So, you know, if you can go from New York to Philadelphia or New
Speaker A
York to Boston, San Diego to Los Angeles, there's a lot of people that would love to be able to do that and do that from their Uber app, another partnership that they have. So, could be very very compelling in a lot of
Speaker A
different ways and eventually I think those flights will be without a pilot. So, definitely one to keep on your watch list.
Speaker A
All right. Let us know what you think about Garmin, Intuitive Surgical, and Joby Aviation. Which one is your favorite AI in the physical world stock?
Speaker A
Leave your comments in the comment section below. Don't forget to subscribe to The Motley Fool's YouTube channel.
Speaker A
Thanks for watching everybody. See you here next time.
Topics:Physical AIGarminIntuitive SurgicalJoby AviationRobotic SurgeryWearableseVTOLAutonomous VehiclesAI GrowthUrban Air Mobility
