Hyundai Motor Group's push into physical artificial intelligence (AI) is failing to offset mounting investor concerns, as weakening automotive earnings prompt brokerages to cut their target prices for Hyundai Motor and Kia.

Despite Hyundai Motor Group Executive Chair Chung Euisun's high-profile campaign to position the group as a leader in physical AI and robotics, analysts are trimming their price targets for the two carmakers, as their disappointing second-quarter earnings underscored slowing profitability in their core vehicle business.

Speaking at the San Francisco AI Summit on Friday, Chung outlined the group's long-term vision for physical AI, describing an ecosystem in which intelligent vehicles, robots, AI-powered factories and eventually entire urban infrastructure operate as an integrated network. The strategy extends beyond autonomous mobility to AI-driven manufacturing, logistics, energy management and smart cities.

While the vision has strengthened Hyundai's long-term technology narrative, market analysts said AI alone is unlikely to support premium valuations without tangible improvements in earnings.

Brokerages broadly lowered their valuations for Hyundai Motor following its weak earnings release last week. Yuanta Securities cut its target price to 570,000 won ($388) from 690,000 won, while Korea Investment & Securities reduced its target to 640,000 won from 770,000 won. Other securities firms, such as Hana Securities, Kyobo Securities and NH Investment & Securities, have also made downward revisions to the target stock price of Hyundai Motor.

The downgrades followed the carmaker’s weaker-than-expected second-quarter earnings. Hyundai Motor’s operating profit fell 20.8 percent to 2.85 trillion won, as global vehicle sales declined 6.9 percent to 991,885 units.

Shares of Hyundai Motor have also dropped more than 20 percent over the past three months, as the firm’s vision for physical AI has failed to cushion the impact of weak earnings from its core vehicle sales business.

Kia also disappointed the market, with its operating profit slipping 4.9 percent to 2.63 trillion won. Kia shares also went on a losing streak of more than 10 percent during the same period for a similar reason.

Brokerages followed a similar footstep by lowering their target price for Kia. KB Securities lowered it to 250,000 won from 300,000 won. Hana Securities and Samsung Securities also reduced their target stock prices for Kia, citing mounting promotional costs and slower-than-expected earnings momentum.

Industry observers expect profitability to recover gradually in the second half, as the group’s parts supply disruption — caused by a fire from its key parts supplier — has returned to normal, and new models are ready to debut in its key markets.

However, they said investors are likely to remain focused on the actual execution of such AI vision rather than future technology ambitions.

“Even if Hyundai Motor Group has accelerated investments in physical AI, including humanoid robotics and autonomous driving, investors look to remain wary, as the company has yet to present a concrete path to monetizing those businesses,” an official from the industry said.