In this article, we will be taking a look at the 10 best medical AI companies.
The Need for AI in Healthcare
Generally, when you hear the term “artificial intelligence,” your mind jumps straight to semiconductor and big tech companies that have been making huge profits as a result of the AI boom. However, tech is not the only industry poised to make a big return because of the rise of AI. In fact, the healthcare industry may actually be the one to benefit the most from the AI revolution. The US has been battling a massive shortage of medical professionals for years now, with the American Medical Association reporting in 2022 that by 2034, the US may see shortages of between 17,800 and 48,000 primary care physicians and between 21,000 and 77,100 non-primary-care physicians. These shortages are arising out of strained labor market conditions and lower numbers of graduating doctors and nurses. This inescapable reality has been plaguing the medical field for quite some time now, and AI may be the revolutionary technology that helps alleviate some of the consequences of such shortages.
The main areas in healthcare that are poised to benefit from the rise of AI are robotics, medical devices, and drug discovery.
AI is Expected to Transform Healthcare
On June 4, Hologic CEO Steve MacMillan joined CNBC’s “Squawk on the Street” to discuss how his company is incorporating AI into its products and how we can expect AI to influence the provision of healthcare in the future. Here are some of his comments:
“We’re doing a combination of internal development and partnering in certain cases with folks who may have specific ideas. You know, at the end of the day, when you think about the big picture, what we’re seeing is a crunched or overworked healthcare workforce, advancing technologies, and really at the core at the highest level, very must disparities of care. So people are getting very different reads, and the ability to bring all that together using AI, I see as the magic to really bringing the level of healthcare and treatment up across the board. So you take the lowest common denominator and bring it way up.”
On the specific problems that AI is solving in healthcare, MacMillan had the following to say:
“It’s really a bit of everything, if you think about it. In radiology… what the machine learning and what AI is able to do is help the radiologist get to the image faster and see it clearer than they could have on their own, and then get to quicker diagnosis. We’ve reduced false positives, we’ve also increased the ability to not have all these callbacks and everything else, and are detecting more cancers.”
According to MacMillan’s insights, it’s very clear that the healthcare sector in the US has been plagued by the issues arising out of an overworked and dwindling workforce for years, but with the rise of more efficient technologies in medicine, the sector is finally able to make up for the consequences of these issues. As a result, medical AI companies have become increasingly popular among investors today. This is why we have compiled a list of these companies below, including some of the best healthcare stocks to buy under $50 and some of the best medical device stocks to buy now.
A doctor in a laboratory, overseeing the development of Artificial Intelligence (AI).
Our Methodology
We sifted through online rankings and healthcare ETFs to find medical AI stocks for our list. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10 Best Medical AI Companies
10. Vicarious Surgical Inc. (NYSE:RBOT)
Number of Hedge Fund Holders: 7
Market Capitalization: $40.6 million
Vicarious Surgical Inc. (NYSE:RBOT) is a healthcare equipment company based in Waltham, Massachusetts. While this is a lesser-known company, it has immense potential in the current AI-driven healthcare development space as it develops and sells single-port surgical robots in the US.
This company offers a unique decoupled design for robotic surgery that aims to make surgical procedures less invasive. The proprietary design for Vicarious Surgical Inc.’s (NYSE:RBOT) robots decouples the actuator arm on the robot to increase the range and precision of movement. The main goal for the company is to incorporate AI in medical procedures to put as much of the procedure as possible on autopilot, thereby reducing human error. The surgical robotics market has been estimated to be worth $150 billion as of this June, and Vicarious Surgical Inc.’s (NYSE:RBOT) ambitious goals and robots are set to capture a huge market share in this area.
Despite the immense potential of this stock to generate exceptional returns, the risks cannot be overlooked. Vicarious Surgical Inc. (NYSE:RBOT) is still a pre-revenue company, with its first clinical patient not expected until 2025. Still, the company has signed beneficial partnership agreements with leading healthcare providers such as HCA Healthcare to help it continue its development. Regardless, as the company stands at present, it will need to dilute existing shares through convertible offerings and more debt, which is a typical model for venture capitalist startup investments that need more time before they show solid growth and returns. This makes Vicarious Surgical Inc. (NYSE:RBOT) the type of medical AI stock that is high risk but also high reward for those who choose to invest in it.
Seven hedge funds were long Vicarious Surgical Inc. (NYSE:RBOT) in the second quarter, with a total stake value of $1.8 million.
9. Certara, Inc. (NASDAQ:CERT)
Number of Hedge Fund Holders: 11
Market Capitalization: $2.1 billion
Certara, Inc. (NASDAQ:CERT) is a healthcare technology company based in Princeton, New Jersey. This company is a leader in bio-simulation software that helps speed drug development.
The bio-simulation field is exceptionally well-positioned to benefit from the AI boom because it conducts computer-aided modeling of biological processes to simulate how a drug will interact in the human body. Through this process, bio-simulation helps screen the compounds and drugs that will work positively, eventually leading to finding the drugs with the most potential for success.
Certara, Inc. (NASDAQ:CERT) operates in this revolutionary field to offer its industry-leading software to a network of approximately 60,000 users to test compounds. The company also integrated AI enhancements into its software in 2023, focusing on adding purpose-built GPTs to understand scientific concepts and validate targets more effectively. Certara, Inc.’s (NASDAQ:CERT) model is trained on client data and a library of about 60 million life sciences research documents to speed the clinical outcome. Because of this model, Certara, Inc. (NASDAQ:CERT) expects revenue growth of 10% in 2025, and is already incredibly profitable, as it generates $60 million in free cash flow annually.
There were 11 hedge funds long Certara, Inc. (NASDAQ:CERT) in the second quarter, with a total stake value of $18.4 million. Boone Capital was the largest shareholder in the company, holding 718,983 shares.
The London Company mentioned Certara, Inc. (NASDAQ:CERT) in its second-quarter 2024 investor letter:
“Certara, Inc. (NASDAQ:CERT) – Investor skepticism around guidance for an improving revenue outlook intensified following CERT’s most recent earnings report, causing the stock to underperform the broader market. We believe CERT owns unique software assets in an underpenetrated industry with plenty of whitespace for future growth. We are encouraged to see them investing through the cycle to come out the other side with a larger salesforce, a more cohesive software platform, and more abilities for cross selling. These actions should further solidify their already leading and protected positioning in bio simulation.”
8. Schrödinger, Inc. (NASDAQ:SDGR)
Number of Hedge Fund Holders: 19
Market Capitalization: $1.5 billion
Schrödinger, Inc. (NASDAQ:SDGR) is another healthcare technology company on our list, based in New York. This company develops a physics-based computational platform that enables the discovery of novel molecules for drug development and materials applications. It is a key player in AI drug discovery.
In 2023, Schrödinger, Inc. (NASDAQ:SDGR) brought in revenue of $216 million, $159 million of which came from its unique software, which it presently licenses out. Through this, the company is minimizing its cash burn by developing its own pipeline through 17 collaborations with key players in the medical field, such as Eli Lilly and Bristol Myers. While Schrödinger, Inc. (NASDAQ:SDGR) is also a new player right now, investors consider it to have immense potential and the ability to grow without financial difficulty since it has $463 million in balance sheet cash to cover the $150 million annual cash burn from its operations.
We saw 19 hedge funds long Schrödinger, Inc. (NASDAQ:SDGR) in the second quarter, with a total stake value of $318.4 million. Bill & Melinda Gates Foundation Trust was the most prominent shareholder, holding 6,981,664 shares.
7. Butterfly Network, Inc. (NYSE:BFLY)
Number of Hedge Fund Holders: 23
Market Capitalization: $204.6 million
Butterfly Network, Inc. (NYSE:BFLY) is yet another healthcare equipment company on our list, based in Burlington, Massachusetts. It develops, manufactures, and commercializes ultrasound imaging solutions.
The company is attempting to disrupt the ultrasound industry with its point-of-care solution and ultrasound-on-a-chip technology. Butterfly Network, Inc. (NYSE:BFLY) has received FDA clearance and has also commercially launched its IQ3 device. In 2023, Butterfly Network, Inc.’s (NYSE:BFLY) revenue topped $66 million. Investors and professionals in the medical AI space support this company because of its accuracy and ease of use of its products relative to the traditional cart-based model for ultrasounds. Butterfly Network, Inc. (NYSE:BFLY) is also using AI in its ScanLab platform to speed up the awareness and distribution of its product. However, despite the immense potential seen in this stock, this is also a high-risk, high-reward play in medical AI.
Butterfly Network, Inc. (NYSE:BFLY) was spotted in the 13F holdings of 23 hedge funds in the second quarter, with a total stake value of $21.8 million.
6. Recursion Pharmaceuticals Inc. (NASDAQ:RXRX)
Number of Hedge Fund Holders: 24
Market Capitalization: $2.2 billion
Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) is a biotech company based in Salt Lake City, Utah. It is leading in the race to decode biology by integrating technological innovations across biology, chemistry, automation, data science, and engineering to industrialize drug discovery.
Recently, Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) announced its own language model, the LOWE Drug Discovery Software, which aims to perform complex drug discovery tasks while using a natural language interface. The software does this by running experiments through purpose-built AI models on massive data sets, which enables the software to screen and find compounds with low effectiveness so Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) can spend less time and money on developing drugs that won’t work.
Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) has six programs in pipeline trials. NVIDIA Corporation has also recently invested $50 million in this company, and is providing priority access to its hardware and resources. Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) also has major partnerships with key healthcare companies such as Bayer and Genentech for research, which drove up $58 million in sales during 2023. While Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) is still a smaller biotech company, its unique model and beneficial partnerships have resulted in the company developing a strong balance sheet and driving sales growth of 30% annually, which makes many investors consider it to be among the best medical AI stocks on the market today, especially considering its potential.
A total of 24 hedge funds were long Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) in the second quarter, with a total stake value of $460.9 million.
5. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 35
Market Capitalization: $1.3 billion
Teladoc Health, Inc. (NYSE:TDOC) is a healthcare technology company based in Purchase, New York. It offers virtual medical services and enabling technologies and telehealth solutions for hospitals and health systems.
In the second half of 2023, Teladoc Health, Inc. (NYSE:TDOC) partnered with Microsoft to integrate ambient clinical documentation tech in its Solo virtual care platform and also to integrate Microsoft Azure’s OpenAI service into its Teladoc Health Solo. In the company’s earnings call for the second quarter of 2024, it was also noted that Teladoc Health, Inc. (NYSE:TDOC) has continued to make big investments in data science and AI to meet the evolving needs of its customers and the healthcare system.
Teladoc Health, Inc. (NYSE:TDOC) presently uses about 60 of its own AI models for various tasks, such as connecting patients to the right healthcare providers. The increasing use of AI in its telehealth business is set to ensure Teladoc Health, Inc. (NYSE:TDOC) retains its position as a leader in the telemedicine market.
Teladoc Health, Inc. (NYSE:TDOC) was spotted in the portfolios of 35 hedge funds in the second quarter, with a total stake value of $339.7 million.
4. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 39
Market Capitalization: $31.7 billion
Moderna, Inc. (NASDAQ:MRNA) is a biotech company based in Cambridge, Massachusetts. It develops messenger RNA therapeutics and vaccines to treat infectious diseases, rare diseases, and more. Moderna, Inc. (NASDAQ:MRNA) initially gained fame and investments for its active role in providing COVID-19 vaccines during the pandemic, but it continues to retain investor attention even today for several reasons.
One of these reasons is that Moderna, Inc. (NASDAQ:MRNA) has several late-stage candidates in the drug development pipeline. Additionally, the company has made AI in medicine a priority. AI is being used by Moderna, Inc. (NASDAQ:MRNA) in vaccine development to speed up key steps for researchers. In 2024, the company also announced a partnership with International Business Machines to use its technology to supercharge its own research.
One example of the use of IBM tech in Moderna, Inc.’s operations (NASDAQ:MRNA) is the predictive role of IBM’s foundation model, MolFormer, is playing for Moderna, Inc. (NASDAQ:MRNA) to predict the properties of molecules. Through this, the biotech company will be able to develop better mRNA medicines more quickly. As a result, several investors are interested in Moderna, Inc. (NASDAQ:MRNA) and consider it to be one of the top medical AI stocks to buy today.
In total, 39 hedge funds were long Moderna, Inc. (NASDAQ:MRNA) in the second quarter, with a total stake value of $1.3 billion.
3. Medtronic plc (NYSE:MDT)
Number of Hedge Fund Holders: 52
Market Capitalization: $113.3 billion
Medtronic plc (NYSE:MDT) is a healthcare equipment company based in Ireland. It develops device-based medical therapies for healthcare systems, physicians, clinicians, and patients globally.
The combined portfolio of Medtronic plc (NYSE:MDT) is well-positioned to deliver growth to its investors. While the rise of weight loss drugs in 2023 initially caused concerns for medical device stocks like Medtronic plc (NYSE:MDT) within the investing community, it didn’t take long for investors to realize that the new weight loss drugs were not a miracle cure for diseases such as diabetes, resulting in device makers such as Medtronic plc (NYSE:MDT) being able to recoup their losses.
Apart from this, Medtronic plc (NYSE:MDT) is also set to benefit greatly from the AI revolution, as it already has six AI products that are FDA-approved. Examples include the company’s intelligent endoscopy tool that decreases miss rates on polyps and adenomas by a factor of 2x and its systems for surgery imaging and neurosurgery. In the diabetes market, Medtronic plc (NYSE:MDT) has its MiniMed 780G detection algorithm, which simplifies diabetes management by automatically adjusting insulin delivery every five minutes. These products have not only made Medtronic plc (NYSE:MDT) a leader in AI-driven medical care but have also resulted in the company experiencing significant financial growth. In the fourth quarter, Medtronic plc’s (NYSE:MDT) organic revenue growth was 5.4%, and the company ended the quarter with over $5 billion in free cash flow to support its dividend yield and $300 million annual share buyback. As a result, many investors are now buying into the company.
Medtronic plc (NYSE:MDT) had 52 hedge funds long its stock in the second quarter, with a total stake value of $2.3 billion.
2. Stryker Corporation (NYSE:SYK)
Number of Hedge Fund Holders: 53
Market Capitalization: $134.6 billion
Stryker Corporation (NYSE:SYK) is a healthcare equipment provider based in Portage, Michigan. The company utilizes both AI and machine learning in its platforms and operations.
In 2022, Stryker Corporation (NYSE:SYK) was using AI for surgery preparation and patient monitoring. This August, the company also announced its acquisition of care.ai, a privately held company that specializes in delivering AI-assisted virtual care workflows, smart room tech, and ambient intelligence solutions. Through this acquisition, Stryker Corporation (NYSE:SYK) aims to strengthen its growing healthcare IT offering and wirelessly connected medical device portfolio.
Stryker Corporation’s (NYSE:SYK) focus on AI in medicine is set to help the company fill an existing gap in the medical field, since nursing shortages, employee retention challenges, and overworked staff conditions are all plaguing the healthcare industry currently. Through AI-focused moves such as the acquisition of care.ai, Stryker Corporation (NYSE:SYK) aims to provide its customers with an enterprise-wide ecosystem that can deliver dynamic clinical workflows and further the development of smart care facilities. Because of such moves, the company has also been able to raise its full-year guidance for 2024. For instance, in Stryker Corporation’s (NYSE:SYK) second-quarter earnings call, expectations for organic sales growth were raised from 9% to 10%.
There were 53 hedge funds long Stryker Corporation (NYSE:SYK) in the second quarter, with a total stake value of $4.03 billion.
Baron Funds mentioned Stryker Corporation (NYSE:SYK) in its first-quarter 2024 investor letter:
“We also added to Surgery Partners, Inc., a leading operator of ambulatory surgery centers, and Stryker Corporation (NYSE:SYK), a large diversified medical device company. We think Surgery Partners should benefit from a multi-year trend of surgical procedures migrating from inpatient hospitals to outpatient centers. Stryker reported strong fourth quarter financial results, highlighted by 11.5% organic revenue growth, and management provided solid guidance for 2024, calling for 7.5% to 9.0% organic revenue growth and double-digit EPS growth.”
1. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 67
Market Capitalization: $172.6 billion
Intuitive Surgical, Inc. (NASDAQ:ISRG) is a healthcare equipment company based in Sunnyvale, California. The company is a leader in healthcare robotics and is best known for its Da Vinci surgical system. This system enables minimally invasive surgery with precision through robotic-enhanced vision and control for surgeons.
The company has huge amounts of patient data through which it trains its AI models. In 2023 alone, Intuitive Surgical, Inc. (NASDAQ:ISRG) Da Vinci system was used to perform over 2.2 million procedures, and over 9,400 Intuitive systems were found to be used in hospitals globally. This represents a growth of 22% in procedures undertaken with the Da Vinci system year-over-year.
Because of its use of AI and machine learning in surgical procedures, Intuitive Surgical, Inc. (NASDAQ:ISRG) has managed to grow its revenue at a 15% annual pace over the last six years, which highlights the fact that the company has been integrating AI and machine learning in its operations well before the AI boom ever came about. In 2024, Intuitive Surgical, Inc. (NASDAQ:ISRG) forecasted revenue growth of 13%, and in 2025, this forecasted growth is expected to increase to 16%. As this company appears to be a veteran in the use of AI in medicine, many investors are flocking to buy its stock because of its immense past growth and future growth potential.
We saw 67 hedge funds long Intuitive Surgical, Inc. (NASDAQ:ISRG) in the second quarter, with a total stake value of $6.4 billion.
Here’s what Baron Funds said about Intuitive Surgical, Inc. (NASDAQ:ISRG) in its second-quarter 2024 investor letter:
“Intuitive Surgical, Inc. (NASDAQ:ISRG) manufactures the da Vinci Surgical System, a robotic surgical system used for minimally invasive procedures. The stock performed well due to excitement about the company’s new robotic surgical system, the da Vinci 5, which offers enhanced imaging, force feedback, and other improvements. We continue to believe Intuitive has durable competitive advantages and will remain the market leader in robotic surgery. We think the company has a long runway for growth as more procedures are performed with the company’s equipment.”
While we acknowledge the growth potential of ISRG, our conviction lies in the belief that some AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ISRG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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