Artificial intelligence (AI) could change the way we treat and prevent illnesses, which makes it a highly valuable opportunity for companies. In fact, the global AI healthcare market is set to reach more than $100 billion later this decade, a Markets and Markets report shows.
Some healthcare players have recognized this potential. Two perfect examples are biotech Moderna (MRNA 3.49%) and medical device giant Medtronic (MDT -0.15%). These two companies are investing in it right now. And they -- and investors -- could benefit down the road.
Both of these stocks have dropped by double digits over the past year. That means you can scoop them up for an absolute steal right now. Let's take a closer look at each.
1. Moderna
Moderna wowed the world with its coronavirus vaccine -- and earned billions of dollars over just a couple of years thanks to that product. The stock soared in the earlier stages of the pandemic. But investors aren't as excited about Moderna these days. Why? Because the vaccine is the company's only product, and demand is on the decline.
But it's important to look at the rest of the Moderna picture. The biotech has more than 40 programs in development, two respiratory vaccine candidates that may launch next year -- and Moderna is making a big leap into AI.
Earlier this spring, the biotech signed a deal with IBM to use that company's generative AI and quantum computing technologies for the development of mRNA medicines. For example, IBM's technology will help Moderna scientists predict a molecule's properties. In turn, right away, they'll better understand potential medicines.
Moderna also has opened new locations and jobs focusing specifically on AI. A new office in Seattle will help the company further scale its use of AI across the business.
Moderna isn't an AI novice. The company already used it in the development of its coronavirus vaccine. So Moderna has seen the potential here for a while.
Today, you can pick up Moderna stock for about 8 times forward earnings estimates. This looks cheap for what may become an AI winner down the road.
2. Medtronic
Medtronic sells medical devices worldwide in the areas of diabetes, cardiovascular, neuroscience, and surgical. The company has suffered from rising inflation -- which has lifted costs. And coronavirus shutdowns in China have weighed on revenue in that market.
At the same time, Medtronic is in the middle of a transformation. The company is divesting lower-growth businesses and boosting revenue opportunities through key acquisitions. These moves should help spur growth over time.
One other element that should keep Medtronic on top is its use of AI. The company has put a big focus on the technology, calling it a "healthcare revolution." Medtronic is already part of this in the world of spinal surgery. The company's spine analyzer offers surgeons potential outcomes for each patient so the surgeon can better plan for each procedure.
Medtronic also uses AI in the area of gastroenterology. The company's GI Genius helps surgeons better identify precancerous tissue. And a partnership with Nvidia has increased the GI Genius' capabilities. Now, developers can train their own AI models -- and eventually, those models could become part of the GI Genius.
AI also is part of Medtronic's diabetes care, predicting insulin needs for patients. The company sees AI as the key to personalized medicine. And it's clear Medtronic aims to integrate AI into as many areas of its business as possible.
Today, Medtronic trades for 16 times forward earnings estimates. This seems pretty reasonable for a company set to lead in a technology that may transform healthcare.