The automotive industry is shifting dramatically. At the 2026 Consumer Electronics Show (CES) in Las Vegas, traditional automakers were largely absent, replaced by companies pushing “physical AI” – the integration of artificial intelligence into the physical world through robotics, autonomous systems, and advanced hardware. This trend signifies a major realignment, where software and robotics firms are now driving innovation instead of established car manufacturers.
The Shift in Focus: From Cars to Robots
For years, CES has been a battleground for automotive tech. But this year, the dominant narrative was not about cars; it was about robots. Hyundai, for example, showcased an extensive exhibit of robots from its Boston Dynamics subsidiary, including the Atlas humanoid and a charging robot for electric vehicles. Other companies, like Mobileye, are doubling down: recently acquiring a humanoid robotics startup for $900 million, despite skepticism around the technology’s immediate viability. Mobileye co-founder Amnon Shashua compared the current hype cycle to the early days of the internet, arguing that while overvaluation may occur, the underlying domain is fundamentally real.
This pivot isn’t just about robots; it’s about AI escaping the digital realm and becoming embedded in physical systems. Nvidia CEO Jensen Huang refers to this as “physical AI,” encompassing autonomous vehicles, drones, industrial machinery, and even wearables. The key is AI models combined with sensors, cameras, and actuators allowing these machines to perceive and interact with the real world.
Geopolitical Pressure and Supply Chain Concerns
The growing influence of Chinese automakers is also reshaping the landscape. Former President Trump has signaled openness to welcoming Chinese companies into the U.S. market, a stance met with resistance from industry groups like the Alliance for Automotive Innovation. Existing regulations, including a 2025 Bureau of Industry and Security rule, currently restrict imports of connected vehicles linked to China or Russia, but geopolitical pressures could change this.
Meanwhile, Canada is lowering import taxes on Chinese EVs, signaling a different approach. Security experts, like Avery Ash of SAFE, warn that allowing Chinese automakers into the U.S. could compromise national security and reverse progress in securing critical supply chains.
Key Deals and Developments
Several significant deals highlighted this shift:
- Nvidia launched Alpamayo, AI models designed to give autonomous vehicles “human-like” decision-making abilities.
- Uber unveiled a new robotaxi developed in partnership with Lucid and Nuro.
- Mobileye acquired Mentee Robotics for $900 million, signaling a commitment to humanoid robotics.
Other notable moves include Allegiant’s acquisition of Sun Country Airlines for $1.5 billion, Flix’s acquisition of Flibco, JetZero’s $175 million Series B funding, and Luminar’s sale of its lidar business for a mere $22 million, highlighting the volatile nature of the tech market.
Regulatory Changes and Future Outlook
New York Governor Kathy Hochul is planning legislation to legalize robotaxis statewide (excluding New York City), expanding existing pilot programs. Meanwhile, Tesla is shifting to a subscription model for its Full Self-Driving software, abandoning the one-time fee option.
The convergence of AI, robotics, and geopolitical shifts is reshaping the transportation and technology industries. The dominance of physical AI is not just hype; it’s a fundamental shift that will redefine how vehicles, machines, and even daily life operate. The coming years will be defined by how these technologies mature, integrate, and navigate evolving regulatory landscapes.
