Physically-Embodied AI Market is an Order of Magnitude Bigger than Informational AI

Most of the time I actively use artificial intelligence for some sort of cognitive, content or informational task. But that’s only one way AI gets used.

But physically-embodied AI, in the form of robots, vehicles and other machines will be very important in a business-to-business and business-to-consumer context, as AI moves from the digital into the physical world.

In fact, the revenue "ceiling" for physically-embodied AI is orders of magnitude higher because it addresses global labor markets and industries.

Informational AI primarily impacts the services and knowledge sectors, with revenue models built on software-as-a-service (SaaS) and efficiency gains.

So subscriptions, licenses to uses application program interfaces or productivity gains in coding, marketing or legal work provide examples of revenue upside.

The total addressable market is therefore bounded by the size of global software and digital advertising markets, plus a percentage of white-collar labor costs.

Physically-embodied AI shifts the value proposition from "assisting humans" to substituting AI for physical human labor.

The revenue potential is therefore the cost of labor globally, which is estimated at roughly $40 to $50 trillion annually.

Capturing even five to 10 percent of that market would dwarf the entire current software industry.

Metric	Informational AI (Digital)	Physically-Embodied AI (Physical)
Primary TAM	~$1T (Software, Ads, Content)	~$50T+ (Global Physical Labor)
Revenue Model	Per user/per token subscription.	Per hour labor rate / Capital expenditure (CAPEX).
Marginal Cost	Extremely Low (Compute-only).	Moderate to High (Hardware maintenance + Compute).
Unit Revenue	~$20 - $200 / Month / User	~$5,000 - $15,000 / Month / Unit (Labor replacement).
Scale of Impact	1x (Baseline)	10x to 50x

Industry	Business Process	Embodied Use Case	Impact	Source Link
Logistics	Warehouse Operations, Inventory Management, Order Fulfillment	Autonomous Mobile Robots (AMRs) and Humanoid Robots for picking, placing, and transporting items; AI-enabled drones for inventory scanning and inspection.	High (Streamlines order fulfillment, reduces labor costs, improves inventory accuracy and throughput.)	Deloitte - AI goes physical: Navigating the convergence of AI and robotics
Transportation	Freight Delivery, Fleet Management, Last-Mile Delivery	Autonomous Trucks (platooning and long-haul driving); Delivery Drones and Sidewalk Robots; AI for Predictive Maintenance on vehicle systems.	High (Reduces operational/fuel costs, increases efficiency, addresses labor shortages, enhances safety.)	Uber Freight - Unlocking physical AI with self-driving trucks
Retail	Customer Service, In-Store Experience, Inventory Monitoring	Customer Service Robots (e.g., answering FAQs, guiding customers); Inventory Robots that scan shelves to detect stockouts or misplaced items in real-time.	Medium to High (Frees up human staff, improves in-store data collection and stock planning, enhances customer guidance.)	Tridorian - The Power of Embodied AI Agents for Business Automation
Computing / Manufacturing	Factory Automation, Quality Control, Process Design	General-Purpose and Humanoid Robots for repetitive, complex, or dangerous assembly and handling tasks; AI-powered machine vision for automated quality inspection.	High (Drives significant productivity gains, reduces maintenance costs/downtime, enhances product quality and worker safety.)	Citi - Embodied Intelligence: The Rise of Physical AI
Content	Data Center Operations, Media Production Infrastructure	Inspection Robots (e.g., Boston Dynamics' Spot) for monitoring physical data center infrastructure; Autonomous equipment in large-scale live event production or broadcasting.	Low to Medium (Primarily affects the maintenance and efficiency of the physical hardware supporting content creation/distribution, rather than the content itself.)	Encord - What is Embodied AI? A Guide to AI in Robotics
Transportation	Traffic Management, Urban Mobility	AI-powered Smart Traffic Signals that dynamically adjust timing based on real-time vehicle and pedestrian flow.	Medium (Reduces travel times and vehicle emissions, improves urban traffic flow efficiency.)	TLI Magazine - 6 Ways AI is Making Transportation Safer and More Efficient

Qualitative AI Benefits Will Likely Outweigh Quantitative Value

Firm leaders will definitely be expected to quantify the upside from their artificial intelligence capital investments. But those quantitative metrics are quite unlikely to capture the full value of AI investments, for similar reasons to the value created by the internet, which is partly quantitative (lower value chain costs; lower market barriers) and partly qualitative (convenience, transaction costs, collaboration cost and effort). 

In fact, the value of the qualitative enhancements, which cannot be directly quantified, likely are greater than the quantitative value that can be measured. 

Aspect	Internet (Quantitative)	Internet (Qualitative)	AI (Quantitative)	AI (Qualitative)
Economic Value	Disintermediates value chains (e.g., e-commerce cuts out retailers). Measurable in cost savings, market growth ($6.3 trillion e-commerce sales globally in 2023).	Enhances convenience and access (e.g., online shopping saves trips). Hard to price but drives user adoption.	Optimizes processes (e.g., AI in logistics cuts costs by 15-30%). Projected to add $13T to GDP by 2030.	Amplifies human productivity (e.g., faster decision-making). Felt as improved quality of work, not just output.
Time Efficiency	Speeds up transactions and info retrieval (e.g., seconds vs. hours at a library). Quantified in time saved per task.	Feels like less stress or more free time (e.g., instant answers via Google). Perception-based value.	Automates complex tasks (e.g., data analysis in minutes vs. days). Measurable in labor hours reduced.	Frees mental bandwidth for creativity (e.g., AI drafts let you refine vs. create). Subtle but transformative.
Scalability	Enables global reach for businesses (e.g., small sellers on Etsy reach millions). Seen in user bases and revenue.	Connects people socially or culturally (e.g., global friendships). Intangible sense of belonging.	Scales decision-making (e.g., AI diagnoses for millions). Quantified in throughput or accuracy rates.	Personalizes at scale (e.g., tailored learning for each student). Feels bespoke, enhancing individual experience.
Job Impact	Displaces some roles (e.g., travel agents) but creates others (e.g., web developers). Net job shift measurable.	Changes how we work (e.g., remote collaboration). Less about numbers, more about lifestyle shift.	Replaces routine jobs (e.g., cashier bots) while creating high-skill roles (e.g., AI trainers). Net effect trackable.	Augments roles (e.g., doctors with AI diagnostics). Enhances capability, not just efficiency—harder to measure.
User Experience	Increases access speed and volume (e.g., streaming vs. VHS rentals). Quantified in bandwidth or clicks.	Delivers entertainment or ease (e.g., Netflix binging). Emotional or convenience-driven value.	Boosts precision (e.g., recommendation algorithms hit 80% accuracy). Measurable in engagement metrics.	Feels intuitive or proactive (e.g., AI predicts your next song). Personal resonance over raw utility.
Data Utilization	Generates user data for monetization (e.g., ad revenue $600B+ in 2023). Clear financial metric.	Shapes how we navigate info (e.g., targeted ads feel relevant). Subtle influence on behavior.	Leverages data for predictions (e.g., fraud detection saves $B). Quantified in error rates or savings.	Adapts to individual patterns (e.g., AI learns your habits). Feels like an extension of self, not just a tool.

And many of the quantitative metrics overstate the impact. Consider a simple measurement of e-commerce retail sales, by revenue. Such metrics generally fail to discount the likelihood that the same products would have been sold through legacy channels. 

In other words, the value of internet retail sales is not the total sales volume, but rather the incremental savings to consumers (price savings, less shipping costs) or retailers (cost of sales). That is likely to be a low-single-digit percentage of sales volume. 

Beyond that, there are the disruptive effects of substitution, which have led to replacement of sales and profit for many legacy industries as new internet-based products replaced the existing products. 

Industry	Legacy Product/Service	Internet Substitute	Impact
Retail (Books, Music, Movies)	Physical stores, CDs, DVDs, printed books	E-commerce platforms (Amazon), streaming services (Spotify, Netflix), e-books	Significant decline in physical store sales, near-elimination of some physical media formats.
Media (News, Newspapers)	Printed newspapers, magazines	Online news websites, blogs, social media	Sharp decline in print subscriptions, shift to digital advertising.
Communications	Landline phones, postal mail	Email, instant messaging, video conferencing (Zoom)	Reduced use of traditional phone lines, decline in postal mail volume.
Travel	Travel agencies, paper tickets	Online travel agencies (Expedia), online booking platforms, digital tickets	Decline of traditional travel agencies, shift to online booking.
Education	Physical textbooks, in-person lectures	Online courses (Coursera), digital textbooks, online learning platforms	Increased accessibility of education, growth of online learning.
Advertising	Print ads, broadcast ads	Digital advertising (Google Ads, social media ads), targeted marketing	Shift from traditional to digital advertising, increased data-driven marketing.
Finance	Physical bank branches, paper statements	Online banking, mobile banking apps, digital statements, online trading platforms.	Reduction of physical bank branch traffic, increase in online financial transactions.
Photography	Film, physical photo albums, photo developing services	Digital cameras, smartphones, cloud storage, online photo printing.	Near elimination of film photography, shift to digital photo storage and sharing.

In some cases, we can quantify the shift. 

Industry	Source
Media (Newspapers)	U.S. Census Bureau: "Newspaper Publishers' estimated revenue dropped by 13.4%, from 2015 to 2022."
Telecommunications	U.S. Census Bureau: "Wired Telecommunications Carriers experienced a 29.6% drop in employer revenue generated through fixed local telephony services from 2015 to 2022, according to the SAS. Meantime, the industry's revenue from internet access services increased 46.3% from $79.1 billion in 2015 to $115.8 billion 1 in 2022."
Information Sector	U.S Census bureau: "The U.S. Census Bureau's 2022 Service Annual Survey (SAS) estimates that revenue of employer firms in the Internet Publishing and Broadcasting and Web Search Portals industry soared 181.9% from $120.2 billion in 2015 to $338.7 billion in 2 2022."
Internet Economy	IAB: "found that the internet economy grew seven times faster than the total U.S. economy during the past four years, and now accounts for 12 percent of the U.S. gross"
https://www.census.gov/library/stories/2024/05/internet-growth.html https://www.iab.com/news/study-finds-internet-economy-grew-seven-times-faster/

“Time saved” or “trips saved” likewise are hard to quantify. The former is helpful, but does not have an actual “cost” we can accurately measure. “Trips saved” might be calculated using a “fuel saved” or “miles not driven” or some other transportation cost savings. 

Study/Source	Focus	Estimated Annual Savings per Consumer	Year	Assumptions
PwC Global Consumer Insights (2023)	Time and Cost Savings	~$200-$300 (product cost savings)	2023	80% of consumers prioritize cost savings; assumes 5-10% savings on $3,000 annual online spend.
Shippo E-commerce Report (2023)	Travel Savings	~$150-$250 (reduced travel costs)	2023	60% shop online to avoid trips; assumes $10-$20 saved per trip, 12-15 trips avoided yearly.
Statista Mobile Commerce (2023)	Time Savings	~$50-$100 (time value)	2023	70% cite time savings; assumes 10-20 hours saved yearly at $5/hr (low-end opportunity cost).
Forbes E-commerce Stats (2023)	Item Costs	~$250-$400 (cheaper goods)	2023	$5.8T market driven by lower prices; assumes 8-12% savings on $3,500 annual retail spend.
Digital Commerce 360 (2022-2023)	Travel & Cost Savings	~$120-$180 (shipping as proxy for travel)	2023	62% value free shipping; assumes $10-$15 saved per order, 12 orders yearly.
Brand Builder University (2023)	Travel & Time Savings	~$200-$350 (travel + time)	2023	$436B mobile commerce; assumes $15-$25 saved per avoided trip, 10-14 trips yearly.
McKinsey Consumer Pulse (2022)	Incremental Cost Savings	~$180-$240 (online deal-seeking)	2022	27% e-commerce growth; assumes 6-8% savings on $3,000 annual spend via deals.
Hostinger E-commerce Stats (2023)	Time & Travel Savings	~$180-$300 (mobile convenience)	2023	60% mobile sales; assumes $12-$20 saved per trip, 10-15 trips avoided yearly.

In many cases, there are “losses” for individuals as well: jobs eliminated; wage rates depressed; product values decreased; legacy products displaced by substitutes. The aphorism that the internet “replaced analog dollars with digital dimes” captures the essence of the process: internet product substitutes often generate less gross revenue and profits than the legacy products they displace. 

Study/Source	Focus	Estimated Costs	Year	Notes & Assumptions
McKinsey Global Institute (2017)	Jobs Eliminated	400-800M jobs lost globally by 2030 due to automation/internet substitution	2017	Assumes 15-30% of work activities displaced; internet accelerates substitution trends.
NBER - Internet, Wages, Consumer Welfare (2006)	Lower Wage Rates	$8.3-$10.6B GDP gain offset by wage divergence in non-IT regions	2006	Broadband adoption boosts wages in IT areas but depresses them elsewhere by 1-3%.
ScienceDirect - Internet & Labor Productivity (2014)	Lower Product Demand	~$8.16-$14.60 GDP/worker lost per 1% internet use if demand shifts	2014	Based on 108 countries; assumes product substitution reduces traditional sector demand.
Brookings - Economy & Internet (2000)	Product Substitution	~$200B annual cost savings (firms) but losses in traditional retail margins	2000	Savings for firms; assumes 5-10% margin loss for offline retailers (~$50B-$100B).
NBER - Internet Changes Labor Market (2002)	Jobs Eliminated & Wages	10-20% wage premium for IT workers; 5-10% job loss in non-IT sectors	2002	Internet shifts demand to tech skills, reducing traditional jobs by 1-2M in US.
ScienceDirect - Internet & Industry Competition (2016)	Lower Product Demand	10-15% profitability drop in less competitive industries due to internet use	2016	HHI increase suggests smaller firms lose market share; assumes $10B-$20B loss/year.
IMF - Globalization & Wages (1997)	Lower Wage Rates	5-15% wage suppression in manufacturing due to online competition	1997	Older data; assumes internet amplifies global substitution, impacting 10M workers.
BLS - Tech Change Impact (2019-2029)	Jobs Eliminated	1.5-3M US jobs lost in routine tasks by 2029 due to internet-driven automation	2019	Projections for 2019-2029; assumes substitution in manufacturing/clerical roles.