With a goal to make the world smarter, happier, and richer, The Motley Fool was founded in 1993 by brothers Tom and David Gardner. Through our website, podcasts, books, newspaper column, radio show, and premium investing services, we assist millions of individuals in achieving financial freedom. To further our mission, The Motley Fool offers a membership program that provides immediate access to top analyst recommendations, comprehensive research, investing resources, and more. Join us today to unlock these benefits. The pharmaceutical and medical device industry faces significant challenges and high failure rates when it comes to bringing products to market. Consequently, healthcare is a prime target for disruption through artificial intelligence (AI) technology. While many healthcare companies are eager to leverage AI capabilities, Recursion Pharmaceuticals (RXRX -4. 67%) and GE Healthcare Technologies (GEHC -1. 42%) have already incorporated AI tools to enhance their financial performance. Both companies have been utilizing AI for several years. Although it is worth noting that neither stock is considered inexpensive, as they have both experienced considerable growth this year. Recursion has a price-to-book (P/B) ratio of almost 6, while GE Healthcare sits around 5. Nevertheless, the significant growth potential of these companies makes them compelling choices for long-term investors seeking substantial returns. Recursion's stock has increased by nearly 90% year-to-date. This clinical-stage biotech company uses a vast biological and chemical dataset to develop new drugs, employing AI technology for efficient drug discovery. Their foundation lies in the Recursion OS, which employs a supercomputer and machine learning algorithms to minimize human bias in drug development. The company's capabilities enable it to conduct millions of wet lab experiments per week. Recently, Recursion secured a $50 million investment from AI chipmaker Nvidia to expedite the development of AI foundation models for biology and chemistry. This strategic partnership allows Recursion to offer these models to other companies for a fee. Recursion's AI initiatives encompass the analysis of cells through high-resolution imaging, identification of disease-related gene associations, and screening of numerous chemicals for potential drug candidates. The company currently has five programs in clinical development, including three therapies in phase 2 trials for the treatment of rare disorders. In the first quarter, Recursion reported revenue of $12. 1 million, a 128% year-over-year increase primarily driven by its collaboration with Genentech, a subsidiary of Roche. Recursion has also established a partnership with Bayer.

Despite these promising developments, Recursion has not yet achieved profitability, with a net loss of $65. 3 million in the first quarter of 2023 compared to a net loss of $56 million in the same period last year. However, with $473 million in cash reserves, Recursion has ample time to reach profitability. In May, Recursion augmented its AI capabilities by acquiring two AI-focused drug discovery start-ups, Cyclica and Valance, for a total of $87. 5 million. On the other hand, GE Healthcare has seen a significant increase in its stock price, up nearly 40% since the beginning of the year. As a recent spinoff from General Electric, GE Healthcare stands as a profitable entity, specializing in medical technology, pharmaceutical diagnostics, and digital solutions. The company has not only benefited from the AI buzz but also leverages AI technology in its diagnostic systems. One notable example is the AIR Recon DL, a deep-learning algorithm that improves the sharpness of radiographic images while reducing scan time. Moreover, GE Healthcare has developed the Critical Care Suite 2. 0, which utilizes AI algorithms in a mobile X-ray device to detect critical diagnoses, such as a collapsed lung. Additionally, their Edison Brain Tumor Screening assists radiologists in accurately identifying brain tumors. In the second quarter, GE Healthcare reported revenue of $4. 8 billion, a 7% year-over-year increase. Earnings per share (EPS) stood at $0. 91 compared to $1. 04 in the same period last year. The company revised its annual organic revenue growth guidance to be between 6% to 8%, up from the previous forecast of 5% to 7%. Similarly, GE Healthcare raised the annual adjusted EPS outlook to between $3. 70 and $3. 85, reflecting a 9% to 14% increase. During the company's second-quarter earnings call, GE Healthcare CEO Peter Arduini highlighted the potential benefits resulting from improved Alzheimer's therapies, as they would likely drive the demand for PET scans and molecular testing, which GE Healthcare machines often perform. The Centers for Medicare and Medicaid Services (CMS) have proposed expanded coverage for Alzheimer's therapies, with a requirement for patients to undergo a PET scan to confirm the disease. Furthermore, patients receiving therapy would typically require follow-up MRI scans to ensure safety. It is important to note that Jim Halley has no position in any of the mentioned stocks. The Motley Fool holds positions in and recommends Nvidia and recommends Roche Ag. For full disclosure, please refer to The Motley Fool's disclosure policy. Invest better with The Motley Fool by accessing our premium services, which offer stock recommendations, portfolio guidance, and more.