AI’s Shadow—and Opportunity
Of course, healthcare stocks have been trading in the shadows of the AI-driven technology mega-caps. Technology stocks have continued to draw fund allocations away from healthcare and other industries. However, we believe investors will increasingly demand clear evidence that AI is being broadly adopted across the real economy and generating tangible productivity and profitability gains.
As this process unfolds, we think the healthcare sector is well positioned to benefit from AI adoption that fuels growth and margins, especially given the pressing need for better outcomes and the sector’s high labor intensity. In 2026, we expect to see many new AI use cases in healthcare that drive measurable contributions to the top and bottom lines of businesses.
Examples already abound, from AI-enabled surgical robots to cancer-detecting patches and systems that help healthcare facilities admit patients faster, leading to higher capacity utilization. As we see it, if AI delivers on its transformational promise, the healthcare sector will be one of the biggest winners. And if AI disappoints, the healthcare sector still wins via investor demand for diversification.
In fast-changing market conditions, we think the key to tapping into the healthcare sector’s potential is constant: focus on business, not science. That means looking beyond headline-grabbing innovations and hard-to-predict drug development, while prioritizing companies that demonstrate operational excellence, prudent capital allocation and strategic reinvestment. By targeting these enduring features of sustainable growth, we believe investors can benefit from a portfolio of durable healthcare stocks that can shine brighter as policy concerns are resolved.
