We recently published a list of the 12 Best Diagnostics Stocks to Invest In Right Now. In this article, we are going to take a look at where Thermo Fisher Scientific Inc. (NYSE:TMO) stands against the other best diagnostics stocks to invest in right now.
Overview of the Clinical Diagnostics Market
According to a report by Mordor Intelligence, the clinical diagnostics market has a size of $88.79 billion as of 2025. It is expected to grow at a compound annual growth rate (CAGR) of 5.48% between 2025 and 2030, reaching $115.94 billion at the end of the forecast period. While North America is the largest market in the domain at present, Asia-Pacific takes the lead as the fastest growing.
As per Grand View Research, the growth in the global clinical diagnostics industry is attributed to the rising demand for lab automation and the development of specialized tests for disease management and early disease detection. In addition, the growing use of point-of-care diagnostics products has also driven a decentralization trend in the healthcare industry.
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AI in Diagnostics Healthcare: Is A New Trend Emerging?
One of the primary trends emerging in the sector is the growing use of artificial intelligence. AI-powered diagnostic tools are revolutionizing the interpretation of medical images with high accuracy, leading to increased adoption. These tools not only improve disease diagnostics but also allow medical professionals to develop more effective and personalized treatment plans, elevating the overall healthcare experience.
On February 24, GlobeNewswire reported that the US AI diagnostics market was worth around $655 million in 2024, as per estimates by Precedence Statistics. It is expected to grow at a CAGR of 20.7% between 2025 and 2034, reaching $4.29 billion by the end of the forecast period.
On February 4, Eric Lefkofsky, founder and CEO of Tempus AI, appeared on CNBC to talk about the impact of generative AI in diagnostics healthcare, among other things. He was of the view that generative AI and large language models aren’t more impactful in any other avenue as much as they are in healthcare. Diagnostics sit at the center of healthcare, as almost every other major decision a doctor makes is undertaken after ordering some kind of laboratory test. If we can make diagnostics more intelligent, it would be possible to route patients to the best possible and most optimal therapy.
Generative AI is thus allowing access to new tools that help structure and make sense of disparate information and use that information, whether it be physician progress notes, pathology reports, molecular data, CAT scans, MRIs, or others, to make sure that the patients are on the optimal therapy path. He further said that the promise of this technology is twofold: it is enormous in helping patients live better and longer lives while reducing the substantial waste in the US healthcare system. Generative AI is thus significantly impactful in healthcare diagnostics.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 diagnostics and research stocks. We then selected the top 12 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A workstation in a research lab stocked with laboratory products and services.
Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 100
Thermo Fisher Scientific Inc. (NYSE:TMO) provides analytical instruments, reagents, equipment, software, and other services for analysis, research, diagnostics, and discovery. It operates through the Analytical Instruments, Life Sciences Solutions, Laboratory Products and Services, and Specialty Diagnostics segments.
The company is on a solid growth trajectory and reported $11.4 billion in revenue in fiscal Q4 2024, reflecting a 5% year-over-year growth. Its strong cash position further bolsters its standing, as it generated over $7.3 billion in free cash flow in fiscal 2024. Thermo Fisher Scientific Inc. (NYSE:TMO) also has a strong dividend yield, with seven consecutive years of growth. It outperformed the sector median of two years by 250%, reflecting its ability to return value to its shareholders.
Thermo Fisher Scientific Inc. (NYSE:TMO) holds a competitive market position due to its leadership in life sciences, long-term customer relationships, and high switching expenses. Its consumables and equipment are especially useful in drug development. The company expects to continue its consistent growth, and management forecasts high-single-digit revenue growth in the coming years.
Analysts are bullish on the stock due to its recent strategic acquisition of SOLV’s Purification and Filtration business, valued at $4.1 billion. The acquisition is anticipated to boost Thermo Fisher Scientific Inc.’s (NYSE:TMO) standing in the bioprocessing sector, especially in filtration, aligning with its long-term growth strategy. Leerink Partners analyst Puneet Souda has maintained his bullish stance on the company, giving it a Buy rating on February 27. He has given Thermo Fisher Scientific Inc. (NYSE:TMO) this rating due to a combination of factors surrounding its acquisition of SOLV’s Purification and Filtration business. The deal is anticipated to become accretive over time, with a high return on invested capital expected by the fifth year, as per the analyst.
Polen Focus Growth Strategy also expressed bullish sentiments for the stock, stating the following in its Q4 2024 investor letter:
“Thermo Fisher Scientific Inc. (NYSE:TMO) appears to continue to move past COVID-related headwinds that hampered growth in recent years. While the backdrop around big pharma budget cuts and a weaker biotech funding environment have weighed on the stock over the past year, Q4 underperformance seems more related to concerns over increased regulatory scrutiny under the new administration, given RFK Jr.’s appointment as the Trump administration’s head of US. Health and Human Services, and his vocal pronouncements against pharmaceutical industry drug pricing. In tough times, pharma and biotech companies lean on suppliers that can deliver the best value. We believe Thermo has a vast offering of products and services bundled at prices that competitors have a hard time matching, allowing them to take significant market share. We maintain our long-term conviction in Thermo as among the most durable compounders in the world, with the ability to drive consistent growth through good and bad macro environments.”
Overall, TMO ranks 2nd on our list of the best diagnostics stocks to invest in right now. While we acknowledge the potential of TMO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
