The AI doctor

The market capitalization of NVIDIA now exceeds that of all the world’s major pharmaceutical companies combined. If we think this through, equity investors should ideally allocate more capital to innovative pharma companies — to ensure the continued development of new drugs and the high-quality production of these treatments.

Pharma companies are rewarded for their R&D efforts through the protected cash flows generated during the life of their patents. Yet today, at least when compared to the leader in AI chips, equity markets seem to assign little value to pharmaceutical innovation — partly due to regulatory and political uncertainties. Several large pharma names now trade at lower valuation multiples than traditional industrial companies.

The long-term consequence could be less innovation in healthcare — precisely when the world needs it most. Unless, of course, the next wave of pharmaceutical progress ends up being powered by cheap AI and rising R&D productivity.