Monday, June 16th, 2025

Happy Monday, and welcome to this week’s edition of Small-Cap Supremacy: MegaTrends.

This week, we’re looking at warehouse automation, a sector surging as eCommerce demand, labor shortages, worker safety initiatives, and AI advancements reshape logistics.

🤖 MegaTrend Monday: Warehouse Automation

Got an hour to spare? I watched this video a few times over the weekend, ASMR-style, while I worked:

In it, Figure founder Brett Adcock (of Archer Aviation fame) shares a video of the company’s testing process for humanoid robotics in a warehouse setting, driven by Figure’s neural network tech.

It’s worth reading Adcock’s full thread for a better look at what Figure’s accomplishing - and I’m definitely bullish on humanoid robotics - but this type of warehouse and logistics automation is far from the be-all, end-all.

As a whole, the warehouse automation sector is booming as eCommerce giants like Amazon, retailers like Walmart, and manufacturers of all stripes, including Tesla and Caterpillar, race to optimize supply chains after learning lessons post-COVID and amid tariff battles (not to mention increased appetite for on-shored operations, driven by the latter).

The global warehouse automation market is projected to reach $41 billion by 2027, growing at a 15% CAGR, driven by cyclical catalysts like the ongoing eComm surge, as online retail sales grew 14% year-over-year in Q1 2025, driving demand for automated fulfillment systems.

Growth is also secular and includes unequivocal policy support, like the CHIPS Act’s regional tech and innovation hub funding, adoption by Federal agencies, including the Postal Service, and the Defense Logistics Agency’s sweeping Warehouse Management System modernization efforts.

Likewise, tech tailwinds like AI-powered robotics and machine vision systems enhance picking, sorting, and inventory management (Amazon has over 750,000 robots in operation, with plans to keep expanding) to improve the sector at large.

Running on Autopilot

Warehouse automation relies on three core functions: machine vision, AIoT, and robotics.

These functions integrate to create seamless, efficient systems:

👁️ Machine vision systems use AI-powered cameras to scan barcodes, identify items, and detect defects, providing the “eyes” for accurate inventory and quality control.

🧠 AIoT solutions act as the “brain,” collecting real-time data from sensors on forklifts and assets to optimize workflows, predict maintenance, and enhance safety.

💪 Robotics serve as the “muscle,” executing physical tasks like picking, sorting, and transporting goods with precision.

⭕️ Together, these technologies form a closed loop: vision identifies and validates, AIoT analyzes and directs, and robotics executes, slashing labor costs and boosting throughput.

In other words, we’re looking at applied cybernetics deployed in ways that Norbert Wiener envisioned decades ago.

As an aside - cybernetics is an endlessly fascinating field, and its theories have applications nearly universally, including culturally and socially.

For a great historical primer and big-picture look at the field, I can’t recommend Andrew Pickering’s The Cybernetic Brain highly enough (yes, that’s an affiliate link but it’s probably worth trying to find elsewhere used as new editions seem to be pretty expensive).

How to Play Warehouse Automation

The easy move is to bet on large-cap industrials like Rockwell Automation or Honeywell.

While stable, these giants face slower growth due to diversified portfolios, entrenched market positions, and a “big picture” perspective rather than drilling down on a specific tech or use case.

Instead, target small-cap disruptors in AIoT solutions, robotic systems, or machine vision technologies.

These subsectors offer hyperscale growth as warehouses modernize, as well as a range of big-money acquisition and partnership opportunities from entrenched competitors as their operational visions become increasingly realized.

Machine Vision: Cognex Corporation $CGNX ( ▼ 1.15% )

Cognex Corporation is edging closer to mid-cap status, with a market capitalization of approximately $5 billion, but remains the near-undisputed leader in machine vision systems that power automated warehouses. Its cameras and software enable precise barcode scanning, item identification, and quality control, serving eCommerce clients like Amazon and Walmart.

The company bagged a major win earlier this month, launching a new AI-powered machine vision cloud platform dubbed OneVision. OneVision works with the company’s In-Sight 3800 and 8900 vision systems and ultimately aims to streamline use and accelerate adoption across industries.

Shares are down about 15% on the year despite nearly 10% year-over-year revenue growth over the past two quarters, consistent profitability, and a modest 1.05% dividend yield to sweeten the deal.

Ultimately, Cognex is larger, stabler, and is less volatile than peers but faces risks from macroeconomic slowdowns affecting retail spending. Still, a focus on wide-ranging logistics automation positions it for steady growth.

Honorable Mention: FARO Technologies $FARO ( ▲ 0.07% ) – FARO Technologies develops 3D measurement and imaging systems, enhancing warehouse automation through precise scanning and mapping.

Robotic Systems: Serve Robotics $SERV ( ▼ 5.46% )

Serve Robotics, with a ~$593 million market cap, develops AI-powered autonomous robots for logistics, including warehouse-adjacent delivery and inventory tasks. Its sidewalk robots, partnered with Uber and Walmart, are adaptable to indoor eComm automation, offering a speculative play in robotics.

Management averaged 40%+ QoQ growth in deliveries since 2021, proving post-pandemic viability, while completion rate fights against the March of Nines to sit at 99.8% today. An $80 million funding round in January strengthened Serve’s cash position to $198 million, supporting R&D and scaling while extending its runway through 2026.

SERV’s stock, down 15% on the year, is volatile due to pre-profitability status and high R&D costs, but analyst targets of ~$17 suggest a nearly 50% upside from current levels. Its logistics focus and partnerships with Uber and Walmart drive growth, though scaling risks persist.

Honorable Mention: iRobot $IRBT ( ▼ 5.5% ) – iRobot designs consumer robotics, notably Roomba vacuums, with some logistics applications like floor-cleaning bots in warehouses. That may sound far-fetched in terms of warehouse scalability, but the company’s real upside lies in its patented tech (there’s a reason, after all, that Amazon fought for acquisition last year).

AIoT Solutions: PowerFleet $AIOT ( ▼ 2.98% )

PowerFleet, with a ~$660 million market cap, delivers AI-driven IoT (AIoT) solutions for warehouse and fleet management. Its SaaS platforms provide real-time tracking, safety analytics, and operational insights, optimizing forklift and asset workflows for eComm operations.

The AIoT company reported earnings earlier today, delivering a blockbuster quarter that included 26% sales growth (75% of which is SaaS recurring revenue) to end the fiscal year. Year-end adjusted EBITDA increased 65% to $71 million, reflecting a pivot to high-margin SaaS.

The company is also making major moves to expand its scope, including a recent partnership with TELUS to deploy AI-driven warehouse safety solutions across North America, leveraging TELUS’s 20 million+ customer network to enhance forklift safety and drive scalable revenue.

Honorable Mention: Itron $ITRI ( ▼ 0.73% ) – Itron delivers IoT platforms for industrial automation, optimizing energy and asset management in warehouses and utilities.

More Warehouse Automation Stocks to Research

If that didn’t whet your appetite, check out these additional warehouse automation picks for more:

  • Columbus McKinnon Corporation $CMCO ( ▼ 2.4% ): CMCO manufactures material handling equipment, including hoists and conveyors, used in warehouse automation. Its core operations rely on steady industrial demand, though its focus on traditional equipment lacks the AI-driven growth of featured subsectors.

  • Allied Motion Technologies $ALNT ( ▼ 1.13% ): ALNT produces a range of precision motor control and imaging solutions for clients, including the Postal Service, as well as typical e-commerce firms. Core warehouse automation platforms include industrial barcode scanners, inkjet gears, and conveyor guidance systems; the firm also has diversified operations in public transit and agriculture.

  • Ambarella $AMBA ( ▼ 0.86% ): Ambarella is an upstream automation pick and designs semiconductor solutions for video processing, enabling AIoT and machine vision in eComm warehouse surveillance and analytics. Growing demand for smart automation across industries helps buffer its bull case, though a 2.0 beta signals massive volatility.

That’s a wrap for this edition of Small-Cap Supremacy. Thanks for your support! We hope you’re armed with fresh ideas to tackle the small-cap market.

Got thoughts or hot tips? Reach out, we love hearing from you!

Want to chat about this article (or small-caps in general)? Be sure to join us on Reddit at r/smallcapsupremacy!

Stay sharp, and we’ll see you next time!

Disclosure: As an Amazon Associate, I earn from qualifying purchases.

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