LTGG Reflections: A robotic reality

Your capital is at risk

We are at an epochal moment where robots understand the ‘real world’ better than ever before. Previously, robots were constrained to structured environments, coded with specific rules for a limited number of actions, like nailing the body to the chassis in car manufacturing. Now, with advancements in intelligence, sensing, processing, and computing, we are seeing applications of robotics in the messy, unstructured real world. So, what does this mean for the LTGG portfolio?

We are seeing progress in two holdings known for their robotics investments – Intuitive Surgical, held since 2010 and Amazon, held since 2004.

In 2023, Intuitive Surgical’s da Vinci robots were used in over 2 million surgeries, a nearly 40 per cent increase since 2021. And this month, Intuitive Surgical unveiled its newest robot – da Vinci 5. It brings 10,000x the computing power, hoping to improve patient outcomes further.

The application of robotics to surgery is one of the biggest challenges for unstructured environments – there is a lack of standardised protocols, people’s bodies differ from person to person and surgeon techniques vary. However, Intuitive Surgical’s robotic system data has helped standardise surgeries, reducing infection risk, side effects, and healthcare costs.

For instance, 95 per cent of prostatectomies in the US were performed robotically in 2021. The additional computing power available to the da Vinci 5 will help record data points in surgeries to improve procedures and train surgeons. In the future, this data will help augment operations in real time. One feature helps overlay pre-operative scans on top of the site of operation, assisting surgeons to make better real-time decisions. This technology is already in use in Intuitive's lung bronchoscopy operations, which aids in detecting lung cancer by illuminating hard-to-reach lung structures.

Last month, we met with Amazon management in Seattle. The CFO and the head of worldwide operations still consider robotics to be “very early” as a driver of future productivity.

So far, Amazon’s robots have been used in separate parts of their warehouses, caged off from employees in ‘robotic fields’. Now, due to progress in generative AI, Amazon’s next-generation robots can seamlessly work alongside employees. ‘Digit’– a small humanoid robot that can use real-time sensing to walk autonomously has been trialled to grasp and pick up heavy bulk objects in fulfilment centres. The scope for robots to take on the repetitive, strenuous, and heavy tasks to help employees and customers is clear.

However, not all companies can invest in their own robotic capabilities, which is where Samsara (held since 2023) and Symbotic (purchased in February 2024) come in.

Symbotic uses AI-powered robotics to automate warehouse operations. Samsara combines sensor data from physical assets (vehicles, equipment, and workflows) – replacing what would previously have been managed and tracked by pen and paper. One of our long-term contentions is that advanced automation will gain a share throughout the economy. As a result, Samsara and Symbotic now appear in an automation circle in our Euler diagram.

Symbotic has invented an end-to-end robotic warehouse grid, which can be installed in current buildings and takes up less floor space. This grid has 10 levels, with 30-40 robots resembling small go carts called SymBots. They speed around at over 20 miles an hour, retrieving any single case from over a million in the Symbotic grid in under two minutes.

Symbotic’s current customer base is grocery chains, but, in the future, this could extend to any industry that can store items in cases for retrieval and delivery. Customers see the potential. Symbotic’s current revenues are around $1 billion, but their order backlog stretches to over $20bn.

The opportunity is clear. Most warehouses and distribution centres have no automation at all – estimated at 80 per cent globally. Where automation does exist, it often comprises piecemeal solutions from various suppliers and software providers, leading to significant adoption barriers and maintenance costs.

Traditional processes involve separate stations for unloading trucks, moving items via forklifts or trolleys, and scanning or organising according to, often outdated, inventory floorplans. Walmart is partnering with Symbotic to install their system in all 42 of Walmart’s Regional Distribution Centres, helping the company reduce costs by around 20 per cent. 

Where could this all lead? Robotics with embedded intelligence has so far been confined to specific manufacturing problems, long-term academic projects, and even science fiction. But if we can better connect the real, messy, and unstructured physical world to the digital and increasingly intelligent world, then transformational growth could result.

With the recent invention of ChatGPT, we have marvelled at what a machine can create with a few written word prompts. Just think what could be possible with a machine that understands the visual and sensory cues of the world around us. We may see Rosey, the trusted cleaner of the Jetson family, shopping for us yet!

Risk factors

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in April 2024 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

Potential for profit and loss

All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.

This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

The images used in this communication are for illustrative purposes only.

Important information

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.

Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.

Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.

Financial intermediaries

This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.

Europe

Baillie Gifford Investment Management (Europe) Limited provides investment management and advisory services to European (excluding UK) clients. It was incorporated in Ireland in May 2018. Baillie Gifford Investment Management (Europe) Limited is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. Baillie Gifford Investment Management (Europe) Limited is also authorised in accordance with Regulation 7 of the AIFM Regulations, to provide management of portfolios of investments, including Individual Portfolio Management (‘IPM’) and Non-Core Services. Baillie Gifford Investment Management (Europe) Limited has been appointed as UCITS management company to the following UCITS umbrella company; Baillie Gifford Worldwide Funds plc. Through passporting it has established Baillie Gifford Investment Management (Europe) Limited (Frankfurt Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in Germany. Similarly, it has established Baillie Gifford Investment Management (Europe) Limited (Amsterdam Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in The Netherlands. Baillie Gifford Investment Management (Europe) Limited also has a representative office in Zurich, Switzerland pursuant to Art. 58 of the Federal Act on Financial Institutions (“FinIA”). The representative office is authorised by the Swiss Financial Market Supervisory Authority (FINMA). The representative office does not constitute a branch and therefore does not have authority to commit Baillie Gifford Investment Management (Europe) Limited. Baillie Gifford Investment Management (Europe) Limited is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co. Baillie Gifford Overseas Limited and Baillie Gifford & Co are authorised and regulated in the UK by the Financial Conduct Authority.

Hong Kong

Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 and a Type 2 license from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 can be contacted at Suites 2713–2715, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. Telephone +852 3756 5700.

South Korea

Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.

Japan

Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.

Australia

Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a “wholesale client” within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”).  Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client.  In no circumstances may this material be made available to a “retail client” within the meaning of section 761G of the Corporations Act.

This material contains general information only.  It does not take into account any person’s objectives, financial situation or needs.

South Africa

Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.

North America

Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.

The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission (‘OSC’). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories. Baillie Gifford International LLC is regulated by the OSC as an exempt market and its licence is passported across all Canadian provinces and territories. Baillie Gifford Investment Management (Europe) Limited (‘BGE’) relies on the International Investment Fund Manager Exemption in the provinces of Ontario and Quebec.

Israel

Baillie Gifford Overseas Limited is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755–1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This material is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.

MSCI Legal Disclaimer

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

96435 10046681