HANOVER (Germany), April 23 -- A blue-eyed humanoid robot carefully opens a box and places a tool inside as a crowd of visitors watch the demonstration of "physical AI" skills at a major industrial trade fair in Germany.

Made by German startup Agile Robots, it was among a host of robots showing off their moves at the event, underlining hopes of a coming AI-powered boost for Germany's long-struggling factories.

Embedding the technology into industrial processes, where Europe already has deep expertise, is seen as a key route for the continent to catch up in the artificial intelligence race against the United States and China.

Such AI-boosted robots make it possible to "actually solve industrial problems", Rory Sexton, chief executive of...