Physical AI emerges as next frontier with trillion-dollar potential

Physical AI is emerging as the next frontier in technological evolution, moving beyond digital interfaces to integrate autonomous systems that can interact with the physical world. At SXSW 2025, industry leaders gathered to discuss this transition from AI infrastructure to widespread physical autonomy, highlighting applications across robotics, healthcare, and transportation that promise to generate trillions in economic value while raising important questions about governance and ethics. This shift represents a fundamental expansion of AI beyond datacenters into tangible systems that can manipulate our environment.

The big picture: Physical AI represents the next evolution of artificial intelligence, encompassing autonomous vehicles, drones, and robotics systems that can interact with and manipulate the physical environment.

• Dr. Anirudh Devgan, CEO of Cadence, described this as a distinct evolutionary phase following the current infrastructure buildout phase focused on datacenters.
• Industry experts project that physical AI will mature within the next two to seven years, creating new opportunities for consumer and industrial applications.

Real-world applications: Amazon’s extensive robotics ecosystem demonstrates the scale at which physical AI is already operating in industry settings.

• The e-commerce giant utilizes more than 750,000 drive units globally, with robotics and automation processing approximately 75% of all Amazon packages.
• In healthcare, Diligent Robotics has deployed 100 “Moxi” robots that have completed about a million transport tasks, saving healthcare workers an estimated 1.5 billion steps.

Economic implications: The transition from digital to physical AI systems represents a multi-trillion-dollar market opportunity across several industries.

• The automotive sector alone could generate $3 to $4 trillion in annual economic value through autonomous vehicles and related technologies.
• This economic transformation will likely create new business models while disrupting existing industry structures.

Governance challenges: Sir Tim Berners-Lee, inventor of the World Wide Web, emphasized the need for a unified global framework for AI governance.

• As physical AI integrates into daily life, critical ethical considerations include data security, equitable integration, and how robotic systems make decisions.
• The panel stressed that companies must balance the pursuit of economic growth with awareness of the profound societal changes physical AI will trigger.

Expert perspectives: The SXSW panel brought together diverse viewpoints from leading figures in technology, robotics, and web development.

• The session was moderated by venture capitalist Jenny Stojkovic and featured insights from Dr. Anirudh Devgan, Sir Tim Berners-Lee, Tye Brady of Amazon Robotics, and Dr. Andrea Thomaz of Diligent Robotics.
• This collection of experts highlighted both the transformative potential and the responsibility that comes with developing autonomous physical systems.