Prediction: This Company Will Be the Robotics Leader, Not Tesla

Key Points

• While Tesla has talked a big game about its Optimus robot, Amazon just deployed its 1 millionth robot at its fulfillment centers.

• The company's robots are using AI to help make the company's warehouse operations much more efficient.

• Meanwhile, it's also using AI in areas like delivery and inventory management.

Tesla (NASDAQ: TSLA) gets most of the media attention when it comes to robotics, thanks to its humanoid robot prototype, Optimus, and Elon Musk's bold claims. In fact, last year Musk said that Optimus could eventually be worth more than everything else from Tesla combined.

But while Tesla talks about the future of robotics, Amazon's (NASDAQ: AMZN) robots are already delivering the goods -- both literally and figuratively. In fact, Amazon is already the largest manufacturer and operator of mobile robotics in the world.

So if you're looking for the real leader in artificial intelligence (AI) robotics, it's Amazon.

Image source: Getty Images.

1 million robots and counting

Amazon got into the robotics space in 2012 when it acquired Kiva Systems for $775 million. While a small deal at the time, it is really starting to pay dividends for Amazon. Earlier this month, the company surpassed 1 million robots operating inside its fulfillment centers. These robots now assist with about 75% of all customer orders placed through Amazon.com.

Those are some huge numbers, and they are likely only going to get bigger. The company is soon expected to have more robot workers than human ones. Amazon's robots also aren't just moving packages around. They're sorting inventory, lifting heavy loads, unloading trailers, and increasingly handling complex warehouse tasks.

AI gives Amazon an advantage

What sets Amazon apart from other robotics companies is how it's using AI to make its robots smarter to improve efficiency. Its Lab126 team is working on a new generation of warehouse robots that can follow voice commands, adjust to problems in real time, and even fix themselves when something breaks.

Amazon also just introduced an AI model called DeepFleet to manage and coordinate its entire robot fleet. The goal is to move packages faster and at lower cost by making better decisions about what robots should do and when.

These robots also go well beyond moving boxes. They can find specific parts, reroute if an aisle is blocked, and unload trucks without needing everything pre-programmed. Some can even spot damaged items before they're shipped, which should reduce returns and improve customer satisfaction.

Robots also don't take breaks or call in sick, which means they can keep working around the clock. Over time, this should lead to faster shipping, lower labor costs, and stronger operating margins in Amazon's core e-commerce business.

AI in delivery, inventory, and beyond

Robots are just part of Amazon's AI efficiency story. Amazon's new Wellspring system uses AI to map out hard-to-reach delivery locations, such as large apartment complexes and office parks. The data can also be integrated into smart glasses for real-time navigation. This all helps improve delivery times, letting drivers complete more routes per shift.

The company is also using AI to fine-tune its inventory and delivery network. Through its SCOT (Supply Chain Optimization Technology) system, Amazon is now able to forecast demand for specific products by taking into account things like regional preferences, weather, and price sensitivity. Ultimately, this keeps inventory closer to customers, helping reduce shipping costs.

These improvements are already translating into better operating performance. Last quarter, Amazon's North America segment grew operating income by 16% on just 8% revenue growth. That's great operating efficiency.

Is Amazon stock a buy?

Of course, robotics is only one part of the Amazon story. Its cloud computing unit, Amazon Web Services (AWS), is its largest business by profitability, and its fastest growing. Customers continue to turn to Amazon's cloud infrastructure to build, train, and scale their own AI models and apps. Meanwhile, Amazon has developed its own custom AI chips, which help give it a cost advantage.

It also has a fast-growing sponsored ads business that is seeing strong growth. When investors think of digital advertising platforms, they generally think of Alphabet's Google search engine or Meta Platforms' social media apps, but Amazon is actually the third-largest platform in the world. Meanwhile, the company is using AI to help third-party merchants both improve listings as well as better target potential customers.

While the stock has rebounded off its lows this year, the company still trades at a reasonable valuation, with a forward price-to-earnings (P/E) ratio of around 36 times this year's analyst estimates. That's still below its historical average.

Between its strong cloud computing growth, leading e-commerce operations, and the lead it has in automation and robotics, Amazon stock looks like a solid long-term buy.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Tesla. The Motley Fool has a disclosure policy.