The undisputed mega-trend of 2023 has been artificial intelligence (AI). Many growth stocks associated with the technology, notably Nvidia, Tesla, and Amazon, have surged in value following the release of ChatGPT in late 2022.
Perhaps that’s not too surprising. These companies are at the forefront of AI, whether through their chips, chatbots, or physical infrastructure. So I do reckon big tech has much further to go.
However, I also think massive AI-powered winners will ultimately be found outside of these dominant firms. And one area where they might emerge is in healthcare, where we’re starting to see breakthroughs enabled by accelerated computing.
Here are two stealthy AI stocks that investors might want to consider.
A powerful platform
The first stock is mRNA pioneer Moderna (NASDAQ: MRNA).
Admittedly, at first glance, this might not look like an AI stock, as it’s synonymous with Covid vaccines. But Moderna is a digital-first biotech company whose scientists write their own mRNA instructions similar to how software is written for a computer program.
On 14 December, the company released incredible news relating to its cancer vaccine candidate. In combination with Merck‘s Keytruda medicine, it reduced after three years the risk of relapse or death by 49% in stage 3/4 melanoma patients.
It also reduced the risk of this deadly skin cancer spreading to other parts of the body by 62%.
The custom-built treatment uses the same technology as the company’s Covid vaccine. So mRNA is used to instruct cells to produce proteins that trigger an immune response to attack specific mutations in cancer cells.
Despite the positive phase 3 trial data, the share price is lower now than it was in October. Why? Well, the firm aims to launch 15 new products within the next five years, but its declining Covid-related sales continue to weigh on earnings.
This makes the stock hard to accurately value, and also a volatile one to own.
Yet I think the market is being short-sighted here and missing the bigger picture. Personalised cancer vaccines could be truly transformational for patients, and it makes me wonder what else this mRNA platform might be applied to.
According to Moderna’s CEO, the cancer vaccine could be available as early as 2025. And the firm is already rapidly expanding to additional tumor types with partner Merck.
Having fallen 80% in a little over two years, I think Moderna shares present an intriguing long-term opportunity. I’m looking to add to my holding in the New Year.
An AI supercomputer
Another stock I’ve been looking at in this space is Recursion Pharmaceuticals (NASDAQ: RXRX). This is a biotech that uses AI for drug discovery through its BioHive-1 supercomputer.
According to Recursion, this is the fastest supercomputer wholly owned and operated by any biopharma company.
Nvidia has just invested $50m in the company and is collaborating with it to train its large foundation models in biology and chemistry. So, with a market cap of only $2bn, it has great long-term growth potential.
However, the firm currently only has five clinical-stage programs, meaning it doesn’t have any recurring revenue yet. So this is definitely a high-risk, high-reward investment.
Nevertheless, it’s one that I’m keeping an eye on in 2024, with a view to picking up some shares.
