3 Stocks Helping to Bring AI to Healthcare

Key Points

• Google Health gives Alphabet a leg up on many potential competitors.
• Medtronic continues to use AI to advance personalized medicine.
• Stryker is a great dividend stock that may also be a buy-the-dip candidate. 

Artificial intelligence stocks are expected to continue showing strong growth in 2025. Much of the attention focuses on the opportunity that comes from the buildout of data centers. But a practical area where AI has been making significant inroads is healthcare.

For some investors, the first place they go with that is on-device AI, which can be seen in smart devices and robotic surgical assistants. But there’s a lot more going on than that. Generative AI is being used to help make healthcare more efficient. Not only does this help reduce staff burnout, but it also opens avenues for personalized medicine.

That means companies will spend money to increase their AI capabilities in this space. Many profitable companies will be able to pass some of that money on to shareholders in the form of dividends and/or capital gains. Here are three compelling medical stocks for you to consider in 2025. 

Google Health Makes Alphabet a Magnificent Choice

If you’re looking for growth stocks in 2025, the Magnificent 7 stocks should make your short list. However, in 2024, it became evident that investors were looking for value even among these top technology stocks.

The same will be true in 2025, which is why Alphabet Inc. NASDAQ: GOOGLlooks like a Buy. The company is practically synonymous with AI, and its Google Health initiative is helping it make strides in the healthcare sector.

In addition to building AI into tools for ultrasounds and breast cancer screening, Alphabet has a series of large language models (LLMs) that stem from its launch of Med-PaLM 2 in 2023. And for developers, Alphabet has launched its Open Health Stack to help developers “hasten the creation of digital health solutions.”

However, with the stock pulling back at around $196, is GOOGL stock a Buy? Analysts suggest it is. Although the consensus price of $206.69 leaves only about a 7% upside for the stock, the analyst forecasts on MarketBeat show some significantly higher targets, including JPMorgan Chase & Co. NYSE: JPM, which gives the stock a target of $232.

Medtronic Is Using AI to Make Healthcare More Efficient

The newly created Department of Governmental Efficiency (DOGE) has government waste on people’s minds, but waste and inefficiency in the healthcare system have been an obsession for Medtronic PLC NYSE: MDT for many years.

The medical device company is perhaps best known for its use of AI in smart devices, such as its robotic surgical assistant platforms, colonoscopy and endoscopy systems and insulin pen that integrates glucose sensor data for patients with type 1 diabetes who need multiple daily injections. 

The company is also making strides in using AI for analyzing large volumes of data to aid physicians in diagnosing and predicting outcomes. In the process, it’s considering the growing need for personalized healthcare in treating diseases.

MDT stock is down about 11.5 % in the three months ending December 30. Some of that may be due to concerns of interest rates staying higher for longer. However, this is setting up as a good buy-the-dip opportunity not only for its leadership in AI, but for a dividend that has increased for 48 consecutive years.

Buy Stryker for the Dividend Now and Growth Later

Stryker Corp. NYSE: SYK is a competitor of Medtronic. Not surprisingly, many of the company’s AI innovations compare favorably with those of Medtronic and other names in the sector.

However, one area where Stryker may stand out is its dividend. The yield isn’t particularly impressive at just 0.93% (Medtronic has a yield of 3.52%). But yield isn’t everything. Stryker has a payout ratio that’s more than 50% less than that of Medtronic, and its dividends have been increasing at an average annual rate of 9% in the last three years. Plus, the company has increased its dividend for 32 consecutive years. 

SYK stock gained about 20% in 2024, including a drop of about 8% in the last month of the year. This puts the stock about 12% below the consensus target of analysts.