Artificial intelligence (AI) has captured the attention of investors for its potential to transform many industries, and its biggest impact could be in the healthcare space. That’s because this technology could solve drug development’s biggest problem: the long time it takes to get a candidate from the drawing board to commercialization. And it could result in better drugs and medical devices, leading to better patient outcomes.
All this means that companies that lead the way can see their profits explode over time. Additionally, the healthcare AI market is expected to grow at a compound annual growth rate of 48% to reach $148 billion by 2029, according to research from Markets and Markets. This means that we are only at the beginning of this exciting story. Ready to get to know the most promising players early? Then consider buying and holding these two healthcare AI stocks for their great long-term potential.
1. Modern
Modern (NASDAQ: MRNA) Shares soared earlier in the pandemic as the company rolled out its coronavirus vaccine and generated billions of dollars in revenue. Today, demand for vaccines is declining, and while the product will likely still generate recurring revenue during the fall vaccination seasons, it will not return to the levels we have seen in the past. This has investors worried about the biotech’s future prospects.
But there is reason to be optimistic about this innovative company. Not only does Moderna have many late-stage candidates in its pipeline, but it is also making AI a priority. The company has already used the technology in the vaccine development process, accelerating certain key steps for researchers. And last year it announced a deal with International business machines to use the company’s technology to boost its research.
For example, it uses IBM’s basic model MolFormer to predict the properties of molecules, with the idea of developing better mRNA drugs faster. This is positive because it could lead to products coming to market faster, giving Moderna new revenue streams.
And Moderna applies AI across the business to improve efficiency and performance. The company will “embrace this new technology to transform the way we work at Moderna in everything we do,” CEO Stéphane Bancel said at an investor event last year.
Moderna’s stock may be in the doldrums now, but over time it could not only recover but rise as AI helps the company achieve its goals.
2. Medtronic
Medtronic (NYSE:MDT) is a medical device giant, selling products in markets including diabetes, cardiovascular, medical-surgical and neuroscience. The company maintains a steady stream of new revenue opportunities thanks to a deep pipeline – and this has helped it win approximately 130 product approvals in key regions in the past year.
The medical device giant has seen profits rise over time, but today it may be entering a whole new phase of growth, thanks to efforts to streamline its operations and increase efficiency, and its early entry into the healthcare AI market.
Medtronic has already received approval for five AI products, from the GI Genius intelligent endoscopy system to the MiniMed 780G diabetes management system. These and other AI-powered products from Medtronic have what it takes to lead to better patient outcomes, and in some cases help surgeons maximize their performance. And that means that over time, these products could become increasingly sought after by patients and hospitals.
Medtronic has created an AI center of excellence to accelerate AI innovation across the company – and this early AI player says the technology even holds the key to personalized medicine, something that could be a game-changer in healthcare .
So there’s reason to believe that Medtronic, a profitable company with a solid long-term track record, could emerge as a leader in the AI race. And that’s why the stock is the best to buy — at its current valuation of 15 times forward earnings estimates — and hold for the long term.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool recommends International Business Machines, Medtronic and Moderna. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) in Healthcare Stocks to Buy and Hold for Big Long-Term Potential was originally published by The Motley Fool
