Why This Stock Could Be the Nvidia of Healthcare

Over the last couple of years, artificial intelligence (AI) has emerged as the world's next megatrend. Thus far, breakthroughs in generative AI have mostly revolved around the technology industry.

In particular, semiconductor specialist Nvidia is viewed as the engine powering the AI vehicle right now. Demand for its most powerful graphics processing units (GPUs) has been off the charts, and investors have cheered on the stock accordingly. That said, many use cases for AI remain largely overlooked by investors.

One of them is how AI is creating exciting new opportunities in the healthcare space. Among the companies leading the charge for AI in the medical world are giant Novo Nordisk and a relatively tiny Hippocratic AI, but I see Eli Lilly (NYSE: LLY) as the top opportunity. Here's why.

AI is a big opportunity in healthcare

AI can impact several areas along 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 healthcare AI sits at around $26.7 billion today. This market is expected to grow at a compound annual rate of 37% from 2024 to 2034 -- reaching $614 billion. The U.S. healthcare AI market alone is forecast to be worth $195 billion by 2034.

What companies are bringing AI to healthcare?

One of the biggest challenges facing the healthcare industry right now is staffing. According to a report published by multinational conglomerate Philips, staffing shortages in hospital settings are spurring demand for more digital infrastructure in the form of automation solutions.

A start-up called Hippocratic AI is tackling that worker shortage head-on by developing healthcare agents powered by large language models (LLM). The company is essentially seeking to bring artificial general intelligence to the healthcare world and is leveraging Nvidia's Avatar Cloud Engine to do it.

Another influential company that is helping bridge the gap between healthcare and AI is Danish pharmaceutical powerhouse Novo Nordisk, the developer of diabetes and obesity care treatments Ozempic and Wegovy.

Novo Nordisk is teaming up with French IT company Atos to develop a supercomputer that is meant to spearhead research in the biotechnology and pharmaceutical industries. It will be powered by GPUs from both Nvidia and Intel, and will be stored within one of Digital Realty's data centers in Denmark.

Why do I see Lilly as the top opportunity?

While the projects from Novo Nordisk and Hippocratic AI are exciting, I think there are some risks surrounding their ambitions. For starters, Hippocratic AI is still a start-up. It could take quite a long time before the company makes significant inroads in treating patients (assuming it does at all). Furthermore, I see Novo Nordisk's supercomputing project as quite broad -- making the investment prospects a little unattractive.