AI’s Shift From Cloud to Physical Hardware
Investors and engineers are shifting focus from cloud GPUs to memory, photonics, edge devices and robotics, boosting interest in ETFs such as ROBO and THNQ.
At VettaFi’s Midyear Market Outlook Symposium, investors and engineers described a shift in AI focus from cloud GPUs to physical infrastructure such as memory, photonics, edge devices and robotics. Exchange-traded funds including ROBO Global Robotics and Automation Index ETF (ROBO) and the ROBO Global Artificial Intelligence ETF (THNQ) have drawn investor interest for exposure to those areas.
According to Zeno Mercer, head of robotics and AI research at VettaFi, memory capacity has become a key constraint because it limits the size of models that can run locally or in cloud data centers. Mercer noted firms are investing across GPUs, CPUs and application-specific chips to “own the stack.” He referenced roughly $800 billion in planned hyperscaler data-center capital expenditure.
Speakers described a redistribution of compute from centralized data centers to edge devices and autonomous systems. Advances in photonics and nanoscale engineering are enabling faster movement of data and, in some cases, physical objects. Technologies that place compute and sensing at the edge were described as “disrupting the disruptors.”
Industry participants pointed to policy and funding actions shaping the area. China and Japan have policies supporting domestic physical AI development. U.S. government programs include investments to secure supply chains, support drone technology and bolster industrial resilience.
Panelists noted robotics is expanding beyond factory automation into consumer, healthcare and government applications. They said many deployments represent net-new spending, such as systems that extend access to services and care. Indexes behind THNQ and ROBO are being revised to add a broader set of enablers and more autonomous systems, including commercial drone platforms and industrial robotics companies tied to reshoring.
Market observers are watching firm capital spending and policy shifts that could influence which suppliers gain market share as hardware firms develop smaller-scale components for moving data and performing computation outside traditional data centers.
VettaFi is the index provider for THNQ and ROBO and receives an index licensing fee. VettaFi has stated that THNQ and ROBO are not issued, sponsored, endorsed or sold by VettaFi and that VettaFi and its affiliates have no obligation or liability in connection with the ETFs’ issuance or trading.
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