While headlines about artificial intelligence (AI) often focus on software developments like OpenAI’s ChatGPT and Microsoft’s Copilot, a potentially more significant investment opportunity is quietly blooming in the medical industry.
The SPDR S&P Biotech ETF (XBI) surged by over 55% between November 2023 and February 2024, with individual biotech companies such as Elevation Oncology (ELEV), Skye Bioscience (SKYE), and Corbus Pharmaceuticals (CRBP) experiencing even more dramatic increases. Behind these surges, AI plays a crucial role.
The connection between AI and the biological sciences lies rooted in the power and quantity of data. To truly capitalize on AI’s capabilities, an abundance of quality information is required. The human body, with its complex patterns of DNA and countless variables, is an ideal source of such data.
Just as computers operate on sequences of 1s and 0s, humans are a compilation of As, Gs, Cs, and Ts, the base types in our DNA molecules, determining our traits, physical characteristics, and even behaviors. The idea of harnessing AI’s power to analyze this wealth of data could revolutionize society by potentially providing solutions for a myriad of human health issues.
The process of developing a new drug typically takes 13.5 years and around $900 million, a huge resource drain that limits the number of potential drug candidates. However, AI can dramatically reduce this process’ expense and duration.
Current drug discovery methods involve laborious, time-intensive efforts for researchers to parse through biological data, identify disease causes, and formulate compounds to tackle these diseases. AI, on the other hand, can automate this process. It can rapidly decode genetic data, pinpoint mutations, and simulate the most effective compounds to counteract these issues.
Consider the case of Takeda Pharmaceutical (TAK), who recently purchased a psoriasis drug for $4 billion that was developed using AI in just six months. Other pharmaceutical giants, including Bayer, Roche, Sanofi (SNY) and AstraZeneca (AZN), have also begun exploiting the advantages of AI in drug discovery.
Investments in AI-assisted drug discovery have tripled over the past four years to nearly $25 billion, according to research firm Deep Pharma Intelligence. Morgan Stanley anticipates this technology will result in an additional 50 novel treatments hitting the market over the next ten years, generating over $50 billion annually. In essence, this heralds the dawn of a $50 billion AI drug discovery revolution.
Outside of drug discovery, AI’s potential applications in healthcare are far-reaching. For instance, Nvidia (NVDA) announced at its GPU Technology Conference (GTC) that it is collaborating with Johnson & Johnson (JNJ) to create AI systems to assist surgeons during operations. Nvidia highlighted that “J&J MedTech is in 80% of the world’s operating rooms and trains more than 140,000 healthcare professionals each year.” Therefore, it’s plausible that within the next decade, a significant proportion of surgeries will be partially automated through AI.
In conclusion, the potentialities of AI in the healthcare sector are extensive. Therefore, this is an opportune moment to enrich your investment portfolio with AI stocks in the healthcare industry.
*Disclaimer: As of the publication of this piece, the author does not hold any positions, directly or indirectly, in the securities mentioned. Remember, staying up-to-date with market analysis and trends is crucial for making informed investment decisions.*
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