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.
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