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These are the stocks to watch as robots take over the world

Intuitive Surgical, Rockwell are pure robot plays

Paramount/Courtesy Everett Collection

Robot warriors may no longer be a thing of science fiction in a few years.

Robots taking over the world is a popular theme in pop culture -- and it’s also emerging as a compelling investment idea as robots step off the pages of science fiction novels into assembly lines and homes.

“Robots are likely to be performing 45% of manufacturing tasks by 2025 versus 10% today,” said Beija Ma, an equity strategist at Bank of America Merrill Lynch, in a 300-page report titled, “Robot Revolution – Global Robot & AI Primer.”

Ma estimated that the robots and AI solutions market will grow to $153 billion by 2020, with robots and robotics grabbing an $83 billion share and AI-based analytics taking $70 billion worth.

Global sales of robots topped $10.7 billion in 2014, with China, the U.S., Japan, Korea and Germany accounting for 70% of the market.

Bank of America Merrill Lynch

Meanwhile, AI has become an integral part of technology with companies like Apple Inc. AAPL, +0.12% Facebook Inc. FB, -1.53% Alphabet Inc. GOOGL, +0.12%International Business Machines Corp. IBM, -0.25% Intel Corp. INTC, -0.47%LinkedIn Corp. LNKD, +0.36% Yahoo Inc. YHOO, -2.62% and Twitter Inc.TWTR, -1.33% investing heavily in AI-based technologies.

In a span of 12 months, Google bought 9 robotics companies while Uber hired 40 researchers from Carnegie Mellon University to develop auto-driving technology, she added.

“AI has become an essential part of the technology industry—including the 3.5 billion plus Google searches made every day—and is increasingly providing the heavy lifting for many of the most challenging problems in computer science,” said Ma.

The eight sectors that offer solid entry points for investors to take advantage of the robot theme are AI, aerospace and defense, autos and transport, financials, health care, industrials, services and agriculture and mining.

Driverless cars, alone, have the potential to generate positive impact valued at $200 billion to $1.9 trillion by 2025.

The defense sector is also expected to witness a surge in adoption of robots and AI due to a desire by government to reduce fatalities while adopting riskier tactics. Drones currently account for 80% of all military robots.

In the financial sector, robo advisers and automated trading systems are forecast to take on the work of 110-140 million full-time equivalents and are expected to generate $5.2 trillion to $6.7 trillion in impact.

“Robots and AI are becoming an integral part of our daily lives as providers of labor, mobility, safety, convenience, and entertainment,” Ma said.

Among the some 200 stocks covered by Bank of America Merrill Lynch with exposure to robotics, only 9 companies are considered pure plays where they derive 100% of their sales from robots and AI.

“Although it is difficult to accurately gauge the link between such exposure and share price performance, we still consider robot and AI exposure as an important and positive point to track given that robots and AI is a global ‘Transforming World’ theme with a long lifespan,” said Ma.

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