Physical AI Is Drawing Fresh Capital, But What Does It Mean For India?

Artificial intelligence has so far been driven largely by cloud infrastructure, where large models process data through remote data centres to power chatbots, search tools, and enterprise software. But the next phase of development is increasingly shifting toward machines that can sense and respond to physical environments.

The technology is now finding its way into factory equipment, logistics systems, and machines designed to perform physical tasks. As industries prepare for this transition, could physical AI become the next major investment theme after cloud-led artificial intelligence?

Why Is Artificial Intelligence Moving Beyond Cloud Models Into Physical Systems?

Cloud-based AI systems work well for tasks such as language processing, image generation, and data analysis. These applications can tolerate small delays because the interaction happens through software interfaces.

Machines operating in the real world, however, require almost instant responses. A robot handling objects on a factory floor or an autonomous vehicle navigating traffic cannot wait for instructions to travel to a distant data centre and back.

Many companies are now designing machines that can process information where they operate, without depending entirely on distant servers. This approach allows devices to process visual inputs, understand physical surroundings, and take immediate actions.

The challenge is significantly more complex than building generative AI models. Unlike language models, machines working in physical settings must judge distance, respond to movement, and adjust when conditions change. This is the area often referred to as physical or embodied AI.

Which Global Companies Are Investing In Physical AI?

Money is beginning to move quickly into companies building machines that can operate with artificial intelligence.

NVIDIA’s role in this shift is expanding beyond the chips used in data centres. Its Isaac software platform, designed to train robots in virtual environments before they are deployed, is now being used by more than 100 companies developing industrial robots and autonomous systems.

Fresh capital is also moving into robotics startups. Figure AI raised $675 million last year with backing from Microsoft, Nvidia, and the OpenAI Startup Fund. Skild AI followed with a $300 million round focused on software for industrial robots.

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What Could This Shift Mean For India’s Economy And Investors?

For India, this trend becomes relevant at a time when automation is already expanding across manufacturing and logistics.

Government programmes such as Make in India and production-linked incentive schemes have also pushed manufacturers to invest in more advanced production capacity. If AI-led machines become more widely adopted globally, some of that shift could gradually reflect in Indian industrial operations as well.

The listed market does not yet offer many pure robotics companies, but several businesses already operate in adjacent areas. ABB India and Siemens Limited remain closely linked to industrial automation, while Tata Elxsi, L&T Technology Services, and KPIT Technologies work in embedded engineering and connected systems.

If physical AI moves deeper into manufacturing globally, companies already positioned around automation and machine software could draw greater investor attention.

Sources:

CNBC TV 18

Arm

DPA Magazine

Nvidia