Artificial intelligence (AI) in healthcare is still in its early stages and is expected to be a major trend over the next decade. A report by Grandview Research puts 2022 spending on AI in healthcare at $15.4 billion and expects it to have a compound annual growth rate of 37.5% from 2023 to 2030.

AI helps healthcare companies keep up with demand for personalized medicine and can be used to reduce the costs of medical care by addressing medical conditions at earlier stages, particularly in oncology. Healthcare professionals are using AI to speed up and improve data analysis and more accurately detect illnesses.

The Clara AI platform from Nvidia (NVDA 1.75%) is helping to accelerate advancements in medical imaging, drug discovery, genomics, and patient monitoring. GE Healthcare (GEHC -0.65%) is known more for its MRI, ultrasound, and medical equipment, but it is also turning to artificial intelligence to help hospitals better inform patient decisions.

Which of these two stocks is the better buy? Let's see.

The case for GE Healthcare

GE spun off GE Healthcare in January, and it began trading on Jan. 4. The parent company owns 19.9% of the spinoff, which has seen its shares rise more than 23% since then. The stock trades at roughly 17 times earnings, below the valuation of a typical healthcare company.

GE Healthcare is a monster-sized spinoff, with roughly 51,000 employees operating in more than 160 countries. It operates in four segments: imaging, ultrasound, patient care solutions, and pharmaceutical diagnostics. The company's AI strategy is to use its patient data from the lab, pathology, imaging, genomics, and other sources for precision care by utilizing its Edison artificial intelligence platform and other digital apps.

The company presented its full-year and fourth-quarter report on Jan. 30. Full-year revenue was reported as $18.3 billion, up 4% and led by its imaging and ultrasound segments. Net income was $1.96 billion, down from $2.2 billion in 2021, something the company attributed to foreign exchange rates, planned increased research and development spending ($1.026 billion compared to $886 million in 2021), and inflation.

In the fourth quarter, revenue was listed as $4.9 billion, up 8% year over year, while net income was $554 million, down 1.7% over the same period in 2021. The company did show strong cash-flow growth in the quarter -- $987 million, up from $436 million in the same period a year ago.

While GE Healthcare is new as a separate company, it is already profitable, and the brand recognition that comes with once being part of GE should help the company sell its software and products. It doesn't offer a dividend, but its board is discussing it.

The case for Nvidia

Nvidia is a chipmaker company whose AI technology is already having an outsized impact on healthcare. The company's shares are up more than 42% so far this year.

Nvidia designs graphics processing units for gaming but is expanding into developing AI chips for drug development and supercomputers. The company is a fabless chipmaker as it outsources the fabrication of its semiconductor chips to a foundry.

Nvidia's business extends well beyond healthcare applications, giving it an advantage of economic diversity over GE Healthcare. However, in another fashion, it can act more like an energy stock. If there's a shortage of chips, as there was during the pandemic, business and margins are good for Nvidia. However, a surplus of chips hurts the company's profits.

The company's popularity, due to what had been consistent revenue and earnings-per-share (EPS) growth, has driven up its share price to roughly 88 times earnings. That's pretty pricey, particularly when you compare it to other big U.S. fabless chipmakers, such as Broadcom and Qualcomm, which trade at roughly 22 and 12 times earnings, respectively.

Nvidia just released full-year and fourth-quarter earnings after the markets closed on Feb. 22. The numbers were concerning, though the stock rose in after-hours trading. Revenue for the quarter was reported as $6.05 billion, down 21% year over year, and quarterly EPS was listed at $0.57, down 52%, though up 111% sequentially. Revenue for fiscal 2023 was $26.97 billion, flat compared to 2022 revenue, with fiscal 2023 EPS of $1.74, down 54% from the prior year.

While the company's chips for gaming continue to see slowing sales -- its gaming business saw revenue of $1.83 billion in the quarter, down 46% year over year -- Nvidia CEO Jensen Huang stressed that the company's AI processor demand would make up for its declining gaming sales.

"AI is at an inflection point, setting up for broad adoption reaching into every industry," Huang said. "From start-ups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI."

The company also said it was working with other cloud service providers to offer a service that allows companies access to Nvidia's AI platform. That should be a plus for healthcare companies that don't have their own AI infrastructure. The service will allow companies to use Nvidia's GTX machines for AI processing by browser access.

Unlike GE Healthcare, Nvidia already has a quarterly dividend, but at $0.04 per share, the yield is an underwhelming .08%.

An easy choice for the time being

Both companies have plenty of promise surrounding AI, but GE Healthcare is seeing more revenue growth lately and trades at less of a premium. Nvidia's high valuation speaks to its popularity with investors, but at some point, if the company has another down quarter or two, its share price is likely to fall. It's still a good long-term choice because of the company's connection to the metaverse.

Nvidia's cloud service could be the next big thing, but GE Healthcare's path to continued growth is a little clearer right now.