How Artificial Intelligence Benefits Health Care: 10 AI Healthcare Stocks to Watch

TradingKey - With the rapid development of artificial intelligence (AI), beyond the well-known large language models such as ChatGPT and DeepSeek, people are continuously exploring new AI applications and investigating how the cutting-edge technologies driving the "Fourth Industrial Revolution" can empower various industries.

According to the first "Global Entrepreneur Report" released by UBS in February 2025, 45% surveyed entrepreneurs plant to invest in AI infrastructure, applications, or models within the next 12 months. Additionally, 67% of the entrepreneurs anticipate that AI will enhance the productivity of typical companies in their industries within five years.

The report also reveals that 62% of the entrepreneurs believe that AI will offer the greatest business opportunities in the future, with the technology and healthcare sectors expect to benefit the most.

OpenAI’s ChatGPT has ushered in a new era of human-machine dialogue, while the DeepSeek model—renowned for its open-source and ultra-low-cost features—has marked a significant milestone in AI applications. Following the emergence of the DeepSeek, AI-driven advancements in the healthcare industry have become one of the most dynamic areas in the capital market, indicating the vast opportunities AI presents in healthcare.

[Source: BoA, BCG]

The Prospects of AI in Healthcare

During the COVID-19 pandemic in 2020, artificial intelligence technology played a crucial role in antibody testing as well as vaccine research and development.

An academic article from the United Nations highlighted that EpitoGen, a new monitoring method integrated with AI technology, can not only detect antibody responses to new variants with an accuracy rate as high as 99%, but also assess individuals' long-term immunity, among other capabilities.

J.P. Morgan noted that AI has significantly accelerated the vaccine research and development process, shortening the time that used to take several years to approximately one year.

In 2024, two researchers from Google's DeepMind won the Nobel Prize in Chemistry, bringing AI in healthcare into the spotlight. DeepMind developed an AI model to solve the long-standing challenge of predicting complex protein structures—an issue that had remained unresolved for over 50 years. The AlphaFold model successfully predicted the structures biomolecules with unprecedented precision.

Cathie Wood, CEO of Ark Invest, believes that healthcare is the most underestimated application of AI. It is expected that by 2030, AI will reduce pharmaceutical development costs by fourfold while increasing returns fivefold. Additionally, cancer screening efficiency is expected to improve by a factor of 20, and the overall market size is projected to expand tenfold.

[Pharmaceutical development cost, Source: Ark Invest]

Grand View Research predicts that from 2023 to 2030, the compound annual growth rate (CAGR) of the global AI healthcare market will reach 12.8%, and the market size will exceed $385.2 billion by 2030. Statista estimates that the global AI healthcare market will reach just under $190 billion in 2030, with significantly higher CAGR of 37%.

Institutions such as Goldman Sachs and McKinsey project that the AI healthcare market will grow at an annual rate of 35% to 40% between 2023 and 2030. Among the key segments, medical imaging and diagnosis are expected to account for 40% of the market share, drug research and development for 25%, and chronic disease management for 20%.

Applications of AI in Healthcare

The applications of artificial intelligence technology in healthcare are rapidly expanding. AI has demonstrated exceptional performance in advancing pharmaceutical research and development, optimizing cost efficiency, improving diagnostic quality, and enhancing the qualityof medical services. It has the potential to reshape the global healthcare landscape.

Regarding medical digitization, McKinsey highlights several advantages for healthcare companies, including accelerating the research and development cycles, enabling greater product customization, supporting continuous and stable product improvement, ensuring supply chain resilience, optimizing costs and efficiency, and enhancing regulatory compliance.

1. Accelerating the Biopharmaceutical Cycle

AI unleashes the potential in aspects such as drug discovery, clinical development, drug manufacturing, and patient engagement. AI has shortened the new drug research and development cycle from the previous 10 to 15 years to 3 to 5 years, and reduced the cost by more than 60%.

[Source: BoA]

Morgan Stanley noted that a  2.5% increase in the success rate of preclinical development could result in an additional 30 new drug approvals in the next 10 years. Doubling this rate could lead to 60 new therapies, generating an estimated $70 billion in value for the biopharmaceutical industry.

Cases: 

• The supercomputer Isambard-AI of the University of Bristol in the UK has been successfully applied to the research and development of Alzheimer's disease vaccines, the treatment of heart diseases, and the improvement of the accuracy of melanoma detection; 
• AlphaFold2 of DeepMind predicts the three-dimensional structure of proteins; 
• Recursion Pharmaceuticals uses AI algorithms to accurately screen potential drug targets.

2. Upgrading Medical Tools

Through deep learning, AI technology can analyze medical images such as X-rays, CT scans, and MRIs to assist in detecting tumors, fractures, vascular diseases and more.

The UK's National Institute for Health and Care Excellence (NICE) stated that AI-based preliminary scanning and diagnostic technology of AI is safe and reliable, with the potential to reduce the need for follow-up appointments.

Cases: 

• The AI function of Google's DeepMind can identify early-stage lung cancer in lung CT scans; 
• IDx-DR, the first AI autonomous diagnostic product approved by the US Food and Drug Administration (FDA), can automatically diagnose retinopathy through fundus photography;
• Dexcom's AI system analyzes blood glucose change trends and gives early warnings of hypoglycemic events.

The applications of medical robots are expanding rapidly, including surgical robots, rehabilitation robots, nursing robots, telemedicine robots, and special medical robots.

Cases: The da Vinci surgical robot, combined with computer vision, has been applied in coronary artery bypass grafting and prostatectomy; Neuralink, founded by Elon Musk, reads nerve signals through implanted chips to improve the motor function of paralyzed patients.

3. Optimizing Medical Services

Once AI technology is integrated as a tool, doctors have more time and energy to communicate with patients about their conditions and treatment options, enabling the delivery of more personalized medical services.

Morgan Stanley noted that for healthcare providers, AI technology can enhance efficiency in areas such as patient access and allocation, diagnosis, risk coding, claim processing, supply chain management, and predictive modeling. For patients, AI-powered telemedicine services can help them access medical resources more efficiently and reduce unnecessary travel.

Cases: 

• IBM(IBM.US) Watson for Oncology analyzes tumor mutations and compares them with global research data to provide personalized targeted drug recommendations for cancer patients; 
• Hims & Hers provides consultations on sexual health, hair loss treatment, mental health, etc., and personalized care plans for patients through an online platform, and its direct-to-consumer (DTC) drug sales model also reduces the cost of drug distribution.

4. Global Medical Technology

On the one hand, AI technology has enhanced the capabilities in disease prevention, diagnosis, and treatment. On the other hand, it has driven improvements in global healthcare standard.

A report by the World Economic Forum (WEF) stated that 4.5 billion peopleworldwide still lack access to basic medical services, and the shortage of healthcare workers is expected to reach 10 million by 2030. AI has the potential to help bridge this gap.

The World Health Organization (WHO) is actively promoting global cooperation in the application of AI technology in chronic disease management and precision medicine. AI is increasingly being used in the early treatment, risk prediction, and personalized medical solutions for diseases such as diabetes and cancer, helping to overcome national barriers that limit global healthcare accessibility

Cases: 

• In regions with underdeveloped medical levels, Google's AI medical imaging system is used to screen for tuberculosis and malaria, improving the early detection rate of diseases in these regions; 
• NVIDIA(NVDA.US) has cooperated with more than 100 global medical enterprises, and its Clara model can accelerate drug design.

Recommendations for AI Medical Stocks

1. AI Healthcare Layouts of Tech Giants

● Google (GOOG.US): It has strong AI technical capabilities. DeepMind under Google owns the protein model AlphaFold recognized by the Nobel Prize; According to the journal "Nature", the medical answers provided by Med-PalM, the medical large model developed by DeepMind, are on a par with those of clinical doctors.

● Amazon (AMZN.US): It possesses cutting-edge AI technology, and the future of medical cloud computing looks promising; HealthScribe leverages AI to automatically generate clinical records from doctor-patient conversations, while Amazon Pharmacy helps patients manage theirmedications, purchase drugs, and handle insurance information, etc.

2. AI Drug Research and Development

● Recursion Pharmaceuticals (RXRX.US): It focuses on AI-driven drug discovery and has partnered with NVIDIA to develop an AI-powereddrug discovery platform, with NVIDIA also making an investment. Additionally, Ark Invest has increased its holdings.

● Absci Corp (ABSI.US): An AI-driven precision drug design platform, it has received strategic investment from AMD. It has developed IgDesign1, the world's first reverse-folding model for antibody design, and has established partnerships with pharmaceutical giants such as Sanofi and AstraZeneca.

3. Precision Medicine and Data Companies

● Tempus AI (TEM.US): It leverage AI and data analysis technology to develop personalized intelligent diagnosis. It has established connections with 65% of medical academic institutions in the United States and built a comprehensive database. Additionally, 19 of the world's top 20 pharmaceutical companies have partnered with TEM. It is considered a concept stock associated with Nancy Pelosi, a heavily held stock by Ark Invest, and has received investments from Google, Novo Nordisk, SoftBank and others.

● Illumina (ILMN.US): The world's largest gene sequencing company, holding a market share of over 70%. It operates across the entire industry chain, including hardware, software, and reagents. Its deep learning-based variant detection software, DeepVariant, is pioneering a new era in variant detection.

4. Virtual Health and Remote Detection

● Hims & Hers Health (HIMS.US): An AI-integrated telemedicine platform, its user base grew by 80% in 2024. It offers weight loss solutions at lower prices than Eli Lilly and Novo Nordisk through a generic drug model. However, caution is advised regarding potential future regulatory changes in weight loss medications.

5. Medical Devices

● Abbott Laboratories (ABT.US): A globally leading diversified healthcare company, its cardiac monitoring devices and medical imaging technologies are increasingly integrating AI algorithms. It has partnered with iCardio.ai to incorporate AI technology into the electrophysiological imaging product line. A Goldman Sachs’ recommended stock.

● iRhythm Technologies (IRTC.US): Provides wearable technology and biosensing diagnostic services , integrating cloud-based data analysis and machine learning. It maintains a stable financial position with a gross profit margin of 70%. In the fourth quarter of 2024, the number of new customers reached a record high, indicating strong growth prospects. A Goldman Sachs-recommended stock.

● Butterfly Network (BFLY.US): It is the world's only single-probe, full-body handheld ultrasound device, Butterfly iQ+. The company is focused on the medical imaging examination market in medically underdeveloped regions, such as the Middle East and North Africa, wheremarket penetration in developing countries has increased significantly.