HomeBusinessArtificial Intelligence (AI) in Healthcare: Two Top Stock Picks

Artificial Intelligence (AI) in Healthcare: Two Top Stock Picks

When you think of artificial intelligence (AI), you probably think of the tech companies that create the nuts and bolts that bring AI to life, such as Nvidia‘chips or Super microcomputer‘s servers. We have already seen growth in these companies’ revenues thanks to sales of their products to customers developing AI projects. They and some of their colleagues continue to make major investments as growth in the AI ​​market appears to be just beginning.

But there’s another way to invest in AI, and in many cases these future AI winners haven’t taken off yet – so you can pick them up for a bargain today and probably profit from them later. I’m talking about players in the healthcare AI market – a market that, at a compound annual growth rate of 48%, is expected to reach more than $148 billion by the end of the decade, according to a report from Markets and Markets . report. Nvidia CEO Jensen Huang has even spoken about the potential of this market, saying this week that AI will likely have the most impact in healthcare.

How can you benefit? By buying shares of healthcare companies that are investing in AI to transform their offerings and streamline their processes. Here are two top stock picks you can get started with now.

A medical worker holds a tablet with an AI-generated image of the body above it.

Image source: Getty Images.

Table of Contents

1. Medtronic

Medtronic (NYSE:MDT) is a medical device giant, selling a wide range of products in the areas of diabetes, cardiovascular disease, medical surgery and neuroscience. And the company’s growth opportunities are far from over: in the past year, the company has received approval for 130 products in key regions. All of this has generally allowed Medtronic to increase sales and profits over time. To further fuel growth, the company has recently taken steps to streamline processes and divest slower-growing businesses to focus on high-growth areas.

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So the image already looks clear. Additionally, Medtronic is taking steps to ensure its leadership in the potentially transformative technology of AI. The company has established an AI Center of Excellence to cost-effectively accelerate the development of AI across its operations. And Medtronic has received regulatory approval for five AI products to date, from the GI Genius intelligent endoscopy tool to the MiniMed 780G diabetes management system. In its most recent quarter, Medtronic said it saw “strong adoption” of its AI-driven surgical planning solution for spine surgery.

All of this could be a major growth driver for Medtronic in the coming years. Many of these tools, such as the surgical planning solution, help surgeons improve outcomes – and this could lead to more and more users and significant revenue growth for Medtronic.

Today, Medtronic stock trades for just 16x forward earnings estimates, which seems like an absolute steal for a company on its way to leading in this multi-billion dollar growth market.

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2. Modern

You probably know it Modern (NASDAQ: MRNA) as the company that launched one of the world’s best-selling healthcare products: the coronavirus vaccine. Moderna generated billions of dollars in revenue from its vaccine in the early stages of the pandemic, and the vaccine could continue to generate significant recurring revenue for years to come.

But what you may not know is that Moderna is also an AI company. The biotech has been using AI for some time and has put the technology at the heart of its entire company’s operations. In 2014, Moderna used machine learning for mRNA design to design potential drugs in silico. A few years later, the company built an AI algorithm to create personalized neoantigen treatments for patients in clinical trials of the potential product.

More recently, Moderna developed an AI academy to train employees in AI so the technology can help all departments become more efficient and accurate. And Moderna has taken other steps to invest in its AI capabilities. The company opened a new office in Seattle last year to scale up its use of AI and joined forces International business machines (IBM) to explore quantum computing and generative AI for use in mRNA drug development. For example, Moderna uses IBM’s MolFormer to better understand the properties of a molecule – and therefore develop better drugs faster.

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All this should help Moderna speed up the drug development process and make it more efficient. This will likely save time and money – and potentially lead to breakthrough products. That could help boost earnings in the long run, making Moderna’s current valuation (with an 8x forward earnings outlook) look dirt cheap.

Should You Invest $1,000 in Medtronic Now?

Before purchasing shares in Medtronic, consider the following:

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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool recommends International Business Machines, Medtronic and Moderna. The Motley Fool has a disclosure policy.

Artificial Intelligence (AI) in Healthcare: 2 Top Stock Picks was originally published by The Motley Fool

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