Citrini Research says AI-enabled robotics is emerging as a major investment trend that could extend the artificial intelligence boom beyond software and data centers, with China’s rapid progress in humanoid robots raising the prospect of a new technology race with the United States.

The research firm, which gained widespread attention for publishing a hypothetical AI-driven economic doomsday scenario, has developed a more bullish thesis around robotics, arguing that physical machines capable of using sophisticated AI systems could become the next growth phase of the AI trade.

Citrini pointed to the World Humanoid Robot Games, held in Beijing in August, as evidence of how quickly the technology is progressing and how China is using public competition to accelerate development.

“Humanoid Olympics may seem like an exercise in the absurd, but really are a top-down strategic effort to push the limits of hardware in a competitive, visible and verifiable setting,” Citrini wrote. “Sending a humanoid at full sprint into a crash wall is literally ‘moving fast and breaking things.’ Scoff at your own risk.”

The event is exposing another shift in the development of artificial intelligence. The first phase of the AI investment cycle was dominated by chips, cloud computing and large language models. The emerging phase is focused on putting those systems into machines that can operate in factories, warehouses, homes, and other physical environments.

The concept, described as “physical AI,” is already attracting technology companies and investors. Atom, the physical automation startup founded by Uber co-founder Travis Kalanick, is expanding rapidly, while UBS strategist Ulrike Hoffmann-Burchardi has highlighted robotics stocks as an area that could benefit from the continued expansion of the AI trade.

Citrini’s argument, however, goes beyond the size of the potential robotics market. The firm says US investors may be underestimating China’s position in the emerging industry.

The report acknowledged that the US could retain an advantage in software and AI decision-making systems, but argued that China has important strengths on the hardware side. Those strengths include a large manufacturing base and established supply chains that could become important if humanoid robots move from experimental prototypes to mass-market products.

That possibility has led Citrini to compare the emerging robotics industry with the electric vehicle market.

“It’s running the EV playbook, with the literal same players,” the firm wrote. “Tesla popularized the modern EV and Chinese companies like XPeng replicated.”

The comparison strengthened the message because the EV industry demonstrated how technological leadership and manufacturing dominance can evolve differently. Tesla helped popularize modern electric vehicles, but Chinese manufacturers subsequently expanded aggressively, competing on cost and production scale.

BYD has become one of the world’s largest electric vehicle manufacturers, while Chinese automakers have been challenging established global brands on pricing and production. The companies are now carrying that industrial competition into robotics.

In June 2026, BYD’s CEO disclosed plans to begin incorporating robots into every showroom to assist with car sales. XPeng has also expanded beyond electric vehicles with XPeng Iron, its own humanoid robot designed to compete with Tesla’s Optimus.

For Citrini, XPeng provides an example of how an established Chinese EV company could potentially use its existing manufacturing capabilities to participate in a future robotics market.

“XPeng is another EV company with a nascent arm but ~100x cheaper,” the author wrote. “I would bet Optimus is in a better position than Iron today, but just look at history. Xpeng’s EV business is rapidly expanding in part by taking share from Tesla.”

The firm is therefore not arguing that XPeng currently has a technological advantage over Tesla in humanoid robotics. Instead, its thesis is that today’s lead may not determine tomorrow’s market structure if robotics follows the same development pattern as electric vehicles.

That stance is of the essence because humanoid robotics is fundamentally a hardware business as well as an AI business. A company needs capable AI models, but it also needs motors, sensors, batteries, actuators, semiconductors, manufacturing capacity, and reliable supply chains. The ability to produce robots at scale and at a commercially viable cost could become as important as the intelligence of the systems controlling them.

Therefore, China’s existing industrial infrastructure is expected to become a significant factor if demand for humanoid robots accelerates.

But there are still substantial hurdles before the technology reaches that stage. Demonstrations and competitions can show that robots are becoming more capable, but commercial adoption will depend on whether machines can perform useful tasks reliably, safely, and at a cost that makes economic sense for businesses and consumers.

That has created a market with both significant potential and considerable uncertainty for investors. The current AI boom has been driven largely by spending on computing infrastructure and software. A successful transition into physical AI could create another layer of demand across robotics, industrial automation, semiconductors, batteries, and related manufacturing industries.

Citrini’s broader warning is that the beneficiaries may not be the same companies that dominate the current AI software race. If robotics becomes the next major application of artificial intelligence, the competitive advantage could shift toward companies that can combine advanced AI with low-cost, high-volume hardware production.

The EV industry provides a precedent for that shift. Tesla demonstrated the commercial potential of a new vehicle technology, while Chinese manufacturers later built substantial scale and competed aggressively on cost.

Citrini’s thesis is that humanoid robotics could follow a similar trajectory, making the emerging contest between US AI capabilities and China’s hardware and manufacturing base one of the important questions for the next stage of the AI economy.

The European Union has asked China to voluntarily restrict exports of hybrid vehicles to the bloc as Brussels seeks to contain a widening trade imbalance with Beijing without triggering a broader trade war, the Financial Times reported on Thursday.

Under the proposal, China would limit sales of Chinese-made hybrid vehicles to roughly 15% of the European Union market, according to people familiar with the discussions cited by the newspaper.

The request marks a significant shift toward negotiated trade management as the EU confronts a surge in Chinese exports across several industrial sectors. Brussels is becoming more concerned that China’s manufacturing capacity is allowing Chinese companies to expand rapidly in European markets at a time when European manufacturers are struggling with weak demand, high costs and the transition to cleaner technologies.

“If they will not limit their exports to our market then we will,” the FT quoted an EU official as saying. “This is about stopping deindustrialisation. We have to act. It’s about managed trade.”

The proposal reportedly extends beyond automobiles. The EU has also asked China to consider limiting exports of other products, including chemicals, while seeking greater Chinese purchases of European goods as part of efforts to narrow the trade imbalance.

The approach would effectively seek to manage the two-way flow of goods rather than relying exclusively on tariffs or other unilateral trade restrictions.

Brussels Confronts a New “China Shock”

European Commission President Ursula von der Leyen sharpened the bloc’s criticism of China on Wednesday, telling the European Parliament that the EU would use every available tool to address what she described as an “unsustainable” trade deficit with Beijing.

The EU’s goods trade deficit with China reached €360.6 billion ($413.4 billion) last year, according to von der Leyen, and widened by 9% during the first six months of this year.

She described the deterioration as a tipping point and warned that Europe was experiencing a second “China shock” through deindustrialisation.

The language captures the central economic concern behind Brussels’ growing aggressive trade posture. European officials are not simply worried about individual Chinese products gaining market share. They are concerned that sustained import growth in sectors such as electric vehicles, batteries and chemicals could weaken domestic manufacturing capacity, investment and employment in industries considered important to Europe’s industrial base.

The hybrid-car proposal also highlights how quickly the trade dispute is expanding beyond electric vehicles.

China has become a major force in global electric and electrified vehicle manufacturing, supported by a large domestic market, extensive battery production and a dense industrial supply chain. European automakers have been competing with Chinese manufacturers while simultaneously investing heavily in the transition away from conventional internal-combustion vehicles.

The challenge for Brussels is to protect European industrial capacity without making European consumers bear the full cost through higher prices or provoking retaliatory measures from Beijing. That helps explain the attraction of a negotiated export ceiling. A voluntary limit could give European manufacturers more room in their domestic market while allowing China to avoid the escalation associated with unilateral EU restrictions.

But such an arrangement would also signal a departure from the EU’s traditional emphasis on open competition and market access. Managing import volumes through negotiated quotas risks creating a more controlled trading relationship in which governments, rather than market forces alone, determine how much foreign production can enter key industries.

China Rejects Overcapacity Accusations

European officials say the surge in Chinese exports of vehicles, batteries, chemicals and other manufactured products is being driven in part by excess industrial capacity in China.

Beijing rejects that characterization, saying that Western concerns over Chinese overcapacity and economic imbalances are protectionist measures designed to restrict China’s industrial development.

That disagreement is at the heart of the broader EU-China trade dispute.

From China’s perspective, companies that have invested heavily in manufacturing and developed competitive supply chains should be able to sell those products abroad. From the European perspective, the rapid expansion of Chinese exports can become destabilizing when production capacity grows faster than domestic demand and the resulting surplus is directed toward foreign markets.

The dispute has become complicated because Europe’s trade deficit with China is not limited to consumer goods. Chinese companies increasingly compete in industrial technologies that Europe has historically regarded as areas of manufacturing strength.

The EU is therefore seeking a combination of measures. Alongside proposed export restraints, Brussels wants China to purchase more European products, potentially providing European companies with greater access to the Chinese market and helping reduce the imbalance from both sides of the trade equation.

European Trade Commissioner Maros Sefcovic is leading talks with China and has said he wants tangible results by October. He is expected to visit China by early next month. The timetable adds urgency to the negotiations. If talks fail to produce concessions, the EU could move toward more aggressive trade measures, increasing the risk of retaliation from Beijing.

That possibility is sensitive for European companies with substantial exposure to China. A confrontation could affect not only automakers but also industrial machinery, luxury goods, chemicals and other exporters that depend on the Chinese market.

For China, accepting voluntary limits could reduce the immediate threat of additional European restrictions, but it could also establish a precedent for other trading partners seeking similar concessions.

The proposal therefore sits at the intersection of two competing objectives. Brussels wants to prevent the loss of European industrial capacity while avoiding a damaging trade war. Beijing wants to preserve access to overseas markets without accepting the premise that its manufacturing strength is the result of unfair overcapacity.

The outcome could determine whether the EU-China relationship moves toward negotiated trade management or a more confrontational cycle of tariffs, quotas and retaliation.