The US healthcare sector currently offers a rare opportunity: it is as inexpensively valued as it has been in decades – within a macroeconomic environment that demands targeted stability and balanced diversification.
After a significant drop in valuations over the past year, the sector is currently trading at about a 20% discount to the forward price-earnings ratio of the broader market – the deepest relative valuation in almost 40 years. At the same time, the sector’s market share is down to just 10%, the lowest level in 15 years.
Despite political uncertainties – such as President Donald Trump's announcement to align US drug prices with international prices – we see the downside risk as limited.
Outflows in recent years, already priced-in negative scenarios and an overall depressed market sentiment, suggest that much pessimism is already reflected in current prices.
Historically comparable phases – such as in 1993 and 2016 – have also shown that when political uncertainty peaks, attractive entry opportunities often arise.
Technology meets resilience: Why healthcare is convincing over the long term
The healthcare sector benefits from an ageing population, which leads to increased demand for medical care and nursing services. Furthermore, the sector will participate in the achievements of AI like no other.
The technology is increasingly seen as a key tool to mitigate the effects of global challenges such as deglobalisation, demographic change, and climate change.
Although the full economic potential is still difficult to quantify, AI offers substantial opportunities within healthcare.
Concrete progress is already visible, for instance, through AlphaFold, an AI system from DeepMind that has revolutionised protein structure prediction. In addition, numerous fields of application with enormous potential are emerging:
- Better and cheaper medications: AI can help discover new active ingredients more quickly and cost-effectively, and make clinical trials more efficient. Novartis and Eli Lilly are already collaborating with Isomorphic Labs to use the AlphaFold model productively in research.
- Early diagnosis and therapy optimisation: AI-supported data collection and the analysis of large datasets enable earlier diagnoses, more personalised treatment plans and reduced need for invasive procedures – with better outcomes at lower costs.
- Personalised therapies: With the help of intelligent data analysis, hospital resources can be used more efficiently, diagnostics can be improved and personalised therapies can be developed.
- Boost in medical technology development: Lower research and development costs, predictive maintenance of medical devices, higher operational efficiency and the automation of administrative processes can lead to significant cost savings.
- Digital processes in hospital operations: The digitisation of medical records, automated workflows and intelligent data management relieves the burden on doctors and nursing staff. According to UnitedHealth CEO Andrew Witty, nurses are already using generative AI for faster document review.
While the US healthcare sector presents compelling investment opportunities, Europe is undergoing its own quiet revolution – powered by artificial intelligence and a surge of healthtech innovation.
European governments and institutions are actively integrating AI into national healthcare strategies, with the European Commission promoting AI adoption to enhance care delivery, reduce costs, and improve access.
Startups across the continent are leading the charge: from the development of a voice-based AI assistant for remote patient monitoring, to AI-powered imaging tools that are redefining early cancer detection.
These innovations are not only improving clinical outcomes but also attracting significant private investment, with healthtech emerging as Europe’s most funded sector in early 2025.
As AI becomes central to diagnostics, hospital operations, and personalised care, Europe’s healthcare landscape is becoming more efficient, resilient, and investor-friendly – offering a complementary growth story to the US market.
These are just a few of the areas in which AI can elevate the healthcare sector to the next level. AI will not only increase productivity and reduce development costs, but also accelerate innovation, especially in research & development and services.
In an environment where general growth drivers are under pressure, technology offers the healthcare sector immense long-term innovation potential.
Inigo Fraser Jenkins is co-head of institutional solutions at AllianceBernstein. The views expressed above should not be taken as investment advice.