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The artificial intelligence (AI) sector is facing challenges as major companies like Meta Platforms Inc. (down over 20% in the last three months) and NVIDIA Corp. (growing only 3% since July) navigate a volatile market. This marks a shift as healthcare stocks are experiencing a surge, driven by a rotation of investments away from tech amidst a backdrop of deteriorating tech stock performance.
Healthcare stocks have underperformed compared to tech over the past five years, gaining 34% versus tech’s explosive rise. Key catalysts for the healthcare sector’s resurgence include: the success of GLP-1 medications generating revenue after Medicare deal agreements, attractive valuations with healthcare trading at 16 times forward earnings compared to over 30 for tech, and significant inflows into healthcare not seen since early 2021, suggesting a stable and defensive sector.
Leading healthcare stocks include Eli Lilly and Company, which saw a price jump due to strong Q3 earnings; Merck & Co., reporting record Q3 revenue over $17 billion; and AbbVie Inc., with substantial sales increases for its drugs SKYRIZI and RINVOQ, positioning it for continuing growth.
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