Hexagon and Robotics Peers: A Rare Opportunity in Undervalued AI Infrastructure Plays

The robotics and automation sector, a cornerstone of the $10 trillion AI infrastructure boom, is currently trading at valuation discounts not seen since the 2020 pandemic lows. Companies like Hexagon AB (HXGBY) and peers in the ROBO/THNQ indices are being penalized by markets focused on near-term geopolitical risks and macroeconomic volatility. Yet their fundamentals—robust cash flows, secular tailwinds, and underpenetrated markets—suggest these discounts are overdone. For investors, the current environment offers a rare entry point into firms positioned to dominate reshoring, smart manufacturing, and AI-driven automation.

Valuation Anomalies: Cheap Metrics Amid Strong Fundamentals

The EV/Sales ratio for Hexagon (HXGBY) stands at 4.90x, below its 5-year average and far cheaper than peers like Keysight Technologies (KEYS) at 24.63x EV/EBITDA and Zebra Technologies (ZBRA) at 17.10x EV/EBITDA. Meanwhile, the TTM P/E ratio of 23.25 is a 30% discount to its 5-year average, despite record revenue growth (+9% in 2024) and operating margins of 24.96%. This compression reflects investor pessimism about global trade tensions and semiconductor shortages, but overlooks the $5.86 billion in annual sales and $1.05 billion in net income HXGBY generated in 2024.

Peer Comparison: The ROBO Global Artificial Intelligence ETF (THNQ) trades at a 22.21x P/E, near its 5-year low, despite consensus estimates of 21% EPS growth in 2025 (vs. 7% in 2024). The ETF's EV/Sales ratio of 3.0x is also well below historical averages, even as its semiconductor and automation holdings (e.g., ASML Holding (ASML), Teradyne (TER)) are critical to AI chip production and smart manufacturing.

Why the Discounts Are Overdone: Secular Catalysts Ignored

1. Reshoring and "Onshoring" Demand: U.S. and EU policies to localize semiconductor and robotics manufacturing are creating $800 billion in projected infrastructure spending by 2030. Hexagon's position in industrial metrology and autonomous systems makes it a key supplier to companies like General Motors (GM) and Siemens (SIE), which are rebuilding domestic supply chains.

2. AI Infrastructure Growth: The $12 billion AI data center boom (per Gartner) requires precision robotics for chip testing (e.g., Teradyne) and logistics automation (e.g., Honeywell International (HON)). Hexagon's Hexagon Robotics division, which supplies autonomous guidance systems, is already seeing 30% order growth in 2025 as data center builders adopt AI-driven robotics for energy efficiency.

3. Underpenetrated Markets: Only 15% of global factories use AI-enabled automation, per McKinsey. As adoption accelerates, firms like Hexagon—whose software tools integrate AI with industrial hardware—stand to capture $50 billion in incremental revenue by 2030.

Risks and the Catalyst for Re-Rating

The primary risks are geopolitical delays in reshoring (e.g., U.S.-China trade tensions) and semiconductor shortages that could slow factory automation timelines. However, two catalysts could drive a valuation rebound:- Q3 2025 Earnings: Hexagon's July 25 earnings report could highlight new contracts in automotive and aerospace (a key focus of U.S. reshoring subsidies). A beat on free cash flow (projected at $1.53 billion) would validate its valuation.

• Macro Stabilization: The Fed's pause on rate hikes and China's fiscal stimulus (expected Q4 2025) could reduce volatility, allowing investors to focus on fundamentals.

Investment Thesis: Buy the Dip, Set Targets

Hexagon (HXGBY) is a core holding at current levels. With 4.90x EV/Sales and a 23.25x P/E, it trades at a 30% discount to its peers' average P/E of 28x. A return to its 5-year average would imply a 30% upside, while a re-rating to 30x P/E (matching its growth profile) could push shares to $14.63.

For diversification, consider Teradyne (TER) (16.90x EV/Sales) and ASML Holding (ASML) (7.8x EV/Sales), which are similarly undervalued but critical to semiconductor automation. Avoid Zebra Technologies (ZBRA), which trades at a premium despite weaker growth.

Final Call: Position for the AI Infrastructure Boom

The robotics and AI infrastructure sector is at a sweet spot: cheap valuations, strong fundamentals, and macro risks already priced in. Investors should use the near-term volatility to accumulate positions in Hexagon and THNQ-linked peers, with a focus on firms benefiting from reshoring and data center automation. The catalysts are in place—now is the time to bet on the builders of the AI economy.