Hyundai's AI ambitions face investor reality check

Hyundai Motor’s ambitious artificial intelligence (AI) pivot faces a credibility test as foreign investors retreat amid lingering doubts over whether the carmaker can turn its costly bets on robotics and autonomous driving into profits.

Foreign investors’ stake in Hyundai Motor topped 35 percent in January but fell to about 24.42 percent as of Friday, reversing much of the optimism that had surrounded the company’s push into physical AI and robotics.

The retreat comes as Hyundai’s earnings outlook has become increasingly uncertain. The company has been hit hard by higher tariffs from the United States, rising costs and production disruptions, while labor strikes in Korea are expected to weigh further on the firm’s third-quarter earnings.

Hyundai’s stock surged earlier this year, as investors embraced its ambition to move beyond traditional automobile business and capitalize on the rapid growth of AI and robotics. However, as the market has shifted its focus back to earnings, questions over when those investments will actually generate meaningful returns have grown.

Hyundai has sought to reassure investors by setting an ambitious profitability target. At its latest CEO Investor Day last month, the automaker said it would raise its operating profit-to-sales ratio to above 9 percent by 2030, while at the same time accelerating investments in hybrids, software-defined vehicles, autonomous driving and robotics.

The problem is the widening gap between those long-term plan and near-term financial performance.

Hyundai’s operating profit fell sharply by 21 percent in the second quarter despite record quarterly sales, reflecting the growing impact of tariffs and other cost pressures.

The third quarter is also unlikely to provide much relief. Prolonged disruptions — triggered by a recent wage strike by its union members — have already affected its production, adding another layer of uncertainty to an earnings outlook clouded by U.S. trade barriers.

“Hyundai Motor’s full-scale strike in August caused production disruptions of about 50,000 vehicles,” said Yoo Ji-woong, an analyst at Daol Invesment & Securities.

“The carmaker will fall short of its initial annual sales target of 4.15 million vehicles due to the production disruptions stemming from not just the strike, but the Middle East conflict in the first quarter.”

The brokerage house expected the carmaker to report an on-year decline of 2.7 percent in vehicle sales this year.

The company has positioned AI and robotics as new pillars of growth, with plans to expand autonomous driving and commercialize humanoid robots. But those businesses remain largely future-oriented, while shareholders are being asked to absorb substantial investment costs now.

For foreign investors, the question is increasingly one of timing. Hyundai may have a credible long-term vision for becoming a mobility and physical AI company, but the market appears less willing to reward that vision without clearer evidence of near-term monetization.

“Proving that the strategy can produce profits while the traditional automotive business is under pressure appears to be a lingering challenge to Hyundai Motor,” an official from the auto industry said.