by Sam Leigh | March 3, 2025
For decades, artificial intelligence has existed primarily in the digital world — powering search engines, automating customer service, and optimizing financial transactions. It has transformed industries in profound ways, but it has remained confined to the realm of software, algorithms, and cloud computing. However, that is changing. In 2025, AI is stepping out of the digital space and into the real world, a transition that will fundamentally reshape industries, economies, and global power structures.
This new frontier is Physical AI — intelligent, self-learning systems embedded in robots, vehicles, and machinery that can perceive, interact with, and manipulate the physical environment. These are not just tools that passively respond to commands, but autonomous entities that make decisions, adapt to new conditions, and evolve without human input. From robotic surgeons to self-repairing infrastructure, from AI-driven sports trainers to autonomous battlefield systems, Physical AI is rapidly becoming one of the most consequential technological shifts of the 21st century.
But like any major advancement, this transformation is not without risks. As with digital AI, the battle for leadership in Physical AI has become an economic and geopolitical struggle — one that pits the United States, its allies, and democratic institutions against an increasingly aggressive and technologically ambitious China. Beijing’s rapid development of AI-powered smart cars, autonomous weapons, and robotic factories poses a unique set of challenges — particularly because of China’s well-documented history of using technology as a means of surveillance, information control, and state power.
This Weekend Read explores the far-reaching implications of Physical AI, the industries that will be transformed, the risks it presents, and the growing battle between the U.S. and China for dominance in what is quickly becoming the most strategic technology race of the century.
The Dawn of Physical AI: A New Era of Intelligent Machines
To understand why Physical AI is such a monumental shift, it’s important to first grasp how AI has evolved over time.
For most of its history, AI has existed in the form of software — algorithms that analyze data, recognize patterns, and generate insights. These AI systems, while powerful, were entirely dependent on digital input. They could predict stock market trends, optimize supply chains, and create stunning works of digital art, but they couldn’t move, sense, or interact with the physical world.
The first major evolution came with agentic AI — personalized assistants, copilots, and automated decision-making systems that could act semi-autonomously within digital ecosystems. These were the ChatGPTs, Geminis, and Claudes of the world, AI models that could not only answer questions but also take action — booking flights, writing code, and making business recommendations.
But the real revolution is happening now. Physical AI represents the next leap forward, where AI is no longer just an intelligence in a machine but a self-learning entity embedded in physical form. These AI-powered machines don’t just process information; they move, adapt, and reshape the world around them. They don’t just answer questions; they perform real-world tasks — driving cars, building infrastructure, assisting in surgeries, and even playing sports.
According to Nvidia CEO Jensen Huang, who has been at the forefront of AI innovation, Physical AI is the next major transformation after agentic AI. In his view, the future belongs to machines that merge AI with physical action, enabling robots, vehicles, and devices to operate independently with unprecedented levels of intelligence and efficiency.
Industries on the Brink of Transformation
Physical AI is no longer confined to research labs or sci-fi speculation. Billions of dollars are pouring into AI-powered robotics, autonomous vehicles, and smart infrastructure — and the impact will be felt in nearly every sector of the global economy.
Healthcare: Robotic Surgeons, AI Caregivers, and Smart Prosthetics
The healthcare industry is already experiencing the profound effects of AI-driven automation, but with the rise of Physical AI, these advancements will become even more dramatic.
Imagine a robotic surgeon that can perform highly delicate operations with sub-millimeter precision, far exceeding human capabilities. These AI-powered systems, which are already in development by companies like Intuitive Surgical and Johnson & Johnson, can analyze a patient’s unique anatomy in real-time, adjust their techniques on the fly, and even learn from every procedure to improve future outcomes.
Beyond surgery, AI-assisted physical therapy is revolutionizing rehabilitation. Exoskeletons powered by adaptive AI are helping paralyzed patients regain mobility, and robotic therapy assistants are personalizing treatments based on each patient’s progress. Unlike human therapists, these machines never tire, never make errors due to fatigue, and can work around the clock to maximize recovery.
For aging populations, AI-powered caregiving robots are stepping in to address the global shortage of healthcare workers. These intelligent assistants help the elderly with mobility, medication management, and even social interaction — reducing the burden on human caregivers while improving the quality of life for seniors.
Manufacturing: Self-Optimizing AI Factories
For years, automation has been reshaping the manufacturing sector, but Physical AI is taking things further. Instead of relying on pre-programmed robotic arms that perform repetitive tasks, manufacturers are now deploying self-learning robots that can adapt, improve, and even collaborate with human workers.
Tesla, Fanuc, and Siemens are at the forefront of this transformation, developing AI-powered robotic systems that don’t just execute commands but autonomously refine their own processes. These robots analyze vast amounts of sensor data in real-time, detecting inefficiencies and self-optimizing production lines without human intervention.
In warehousing and logistics, AI-driven robots are not just sorting and packing goods — they are learning from experience, predicting inventory needs, and dynamically reorganizing workflows to maximize efficiency.
Transportation: Autonomous Vehicles, AI-Powered Freight, and Smart Roads
Autonomous vehicles have been the holy grail of AI research for years, and we are now reaching an inflection point where AI-powered transportation is becoming mainstream.
Companies like Waymo, Tesla, and TuSimple are deploying AI-driven freight trucks that can autonomously navigate highways, reducing reliance on human drivers. In densely populated cities, AI-powered drones and last-mile delivery bots are beginning to take over urban logistics, lowering costs and improving efficiency.
Even public infrastructure is getting an AI upgrade. Smart roads equipped with AI sensors can dynamically adjust traffic flow, predict congestion before it happens, and even interact with autonomous vehicles to create seamless, self-regulating traffic networks.
The China Factor: A Growing National Security Threat
While the rise of Physical AI brings enormous economic and technological benefits, it also introduces serious national security risks — particularly as China aggressively expands its AI capabilities.
One of the most alarming developments is China’s DeepSeek AI, which is being integrated into smart vehicles, robotics, and autonomous infrastructure.
The problem? DeepSeek, like all Chinese AI firms, is legally obligated to share data with the Chinese Communist Party.
Smart Cars as Surveillance Devices: DeepSeek-enabled vehicles are collecting driver behavior, location data, and even in-car conversations, all of which could be accessed by Beijing.
Chinese AI in Defense Applications: Reports indicate that China is deploying AI-powered robotic infantry and autonomous combat drones in military operations.
U.S. and European Crackdowns: In response to security concerns, the U.S., Italy, Taiwan, and South Korea have all restricted DeepSeek AI, citing data privacy risks and potential espionage.
With AI-powered machines increasingly embedded in critical infrastructure, security agencies are sounding alarms. If China achieves dominance in Physical AI, it won’t just control the technology — it could control the physical world itself.
Final Thoughts: The Future is Physical
We are at the dawn of a new technological revolution — one where AI doesn’t just think, but moves, senses, and acts in the real world.
As the battle for Physical AI supremacy unfolds, the choices we make today will determine who controls the next era of economic power, security, and global influence.
The AI revolution is no longer just about software — it’s about the machines that will shape our world.
The only question left is: Who will build them first?
Sam Leigh is the CEO and Managing Partner at iA, writing about technology, innovation, and the future of culture for The Weekend Read. Book a 1:1 with Sam Here!
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