In recent years, artificial intelligence (AI) has emerged as the next global megatrend. Until now, advances in generative AI have mainly revolved around the tech industry.
In particular, the semiconductor specialist Nvidia AI is seen as the engine driving the car right now. Demand for its more powerful graphics processing units (GPUs) has been spectacular and investors have applauded its stock accordingly. That said, many AI use cases remain largely ignored by investors.
One of them is how AI is creating exciting new opportunities in the healthcare space. Companies leading the AI push in the medical world include giants New Nordisk and a relatively small Hippocratic AI, but I see Eli Lilly (NYSE: LLY) as the best opportunity. Here’s why.
AI is a huge opportunity in healthcare
AI can impact various areas of the healthcare spectrum, including service-oriented jobs such as nursing, software platforms, and hardware devices.
According to Precedence Research, the global total addressable market (TAM) for AI in healthcare currently stands at around $26.7 billion. This market is expected to grow at a CAGR of 37% between 2024 and 2034, reaching $614 billion. The US market for AI in healthcare is projected to reach $195 billion by 2034.
Which companies are bringing AI to healthcare?
One of the biggest challenges facing the healthcare sector right now is staffing. According to a report released by the multinational conglomerate PhilipsStaff shortages in hospitals are spurring demand for more digital infrastructure in the form of automation solutions.
A startup called Hippocratic AI is directly addressing that workforce shortage by developing healthcare agents powered by large language models (LLMs). The company is essentially looking to bring artificial general intelligence to the world of healthcare, and it’s leveraging Nvidia’s Avatar Cloud Engine to do so.
Another influential company that is helping to bridge the gap between healthcare and AI is Danish pharmaceutical powerhouse New Nordiskthe developer of diabetes and obesity care treatments Ozempic and Wegovy.
Novo Nordisk has partnered with French IT company Atos to develop a supercomputer that aims to lead research in the biotech and pharmaceutical industries. It will be equipped with Nvidia GPUs and Inteland will be stored within one of Digital Real EstateData centers in Denmark.
Why do I see Lilly as the best opportunity?
While the Novo Nordisk and Hippocratic AI projects are exciting, I think their ambitions come with some risks. For a start, Hippocratic AI is still a startup. It could be quite a while before the company makes significant progress in treating patients (assuming it ever does). Also, I find Novo Nordisk’s supercomputing project to be quite large, making investment prospects unattractive.
In contrast, Eli Lilly has identified a specific opportunity to seize and is leveraging AI to find solutions. Specifically, it has partnered with OpenAI, developer of ChatGPT, to assist with research into treating drug-resistant pathogens.
According to a report by MarketsandMarkets, the global antimicrobial resistance market size will reach $7.7 billion by 2028. Furthermore, the World Bank projects that the negative economic impacts of antimicrobial resistance could exceed $1 trillion annually by 2030.
Eli Lilly is already recognized as one of the world’s leading pharmaceutical companies. Its portfolio includes many bestsellers, such as Verzenio, Trulicity, Taltz, Jardiance, Mounjaro and Zepbound. In addition, the company is on the verge of making a splash in the $31 billion Alzheimer’s disease market.
Not only is Eli Lilly focusing on a large and underserved area of healthcare, it is also partnering with one of the biggest names in artificial intelligence to address that challenge. I suspect it will be years before Lilly makes a breakthrough in developing an effective new antimicrobial drug that works against bacteria that have become resistant to currently available treatments. Or its efforts could ultimately fail.
However, if I had to pick one company that I think has the best chance of succeeding at the intersection of AI and healthcare, I would choose Eli Lilly. Given its long history in drug development and commitment to innovation, I see some parallels between Nvidia’s role in the tech sector and Eli Lilly’s influence in healthcare.
I think it is laying the groundwork for long-term success and will reach a new level of innovation beyond its medical labs. If investors are looking for a high-growth opportunity in AI for healthcare, I think Eli Lilly is the best choice.
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Adam Spatacco has positions in Eli Lilly, Novo Nordisk, and Nvidia. The Motley Fool has positions in and recommends Digital Realty Trust and Nvidia. The Motley Fool recommends Intel and Novo Nordisk and recommends the following options: Intel $24 call options expiring November 2024. The Motley Fool has a disclosure policy.
Why This Stock Could Be the Nvidia of Healthcare was originally published by The Motley Fool