Core Insights - The healthcare industry is experiencing potential disruption from artificial intelligence (AI) technology, presenting investment opportunities for the Fidelity Disruptive Medicine ETF (FMED) [1] Investment Focus - FMED targets companies that are positioned to disrupt the healthcare sector with innovative solutions, including Boston Scientific Corp, Alynlam Pharma, and Argenx, which may not be as recognizable as larger firms like Eli Lilly or UnitedHealth [2] - The ETF is actively managed, allowing portfolio managers to adjust holdings based on market conditions, with exposure to areas such as robotic surgery, gene therapy, genomics, rare diseases, medical devices, immunotherapy, and technology-based healthcare platforms [3] AI Integration in Healthcare - FMED includes companies utilizing AI to provide innovative healthcare solutions, with rising capital investment in the sector supporting the investment case for such funds [4] - A report from the World Economic Forum highlights ongoing challenges in healthcare, noting that 4.5 billion people lack access to essential services and forecasting a shortage of 11 million healthcare workers by 2030, creating opportunities for AI-driven delivery services [5] - AI digital health solutions are expected to enhance efficiency, reduce costs, and improve health outcomes globally, emphasizing the need for further investment in AI [6]

Core Insights - The healthcare sector has underperformed in the S&P 500, with gains of about 10% in 2025 compared to a flat performance in healthcare [1] - Healthcare stocks are currently trading at a 10% discount to their fair value, marking one of the cheapest valuations in over five years [1][3] - Health tech is highlighted as a promising segment within healthcare, showing strong fundamentals and potential for capital growth [2][6] Healthcare Sector Performance - The healthcare sector is characterized by volatility and complexity, with both opportunities and risks tied to innovation [1] - The Health Care Select Sector SPDR Fund (XLV) has only increased by 3% since April, indicating underperformance relative to the broader market [2] Health Tech Segment - Health tech companies are capital and R&D intensive, focusing on disrupting traditional healthcare practices [2] - The ROBO Global Healthcare Technology and Innovation ETF (HTEC) has gained nearly 25% since April, outperforming the broader healthcare sector [2] - HTEC is currently trading at the bottom of its historic EV/sales ratio, suggesting a potential for correction and growth [3] Innovation and M&A Activity - Accelerating innovation in areas like genomics and robotics is driving growth in health tech [3][4] - AI-driven drug discovery is expected to significantly impact the sector, with an estimated $236 billion in revenues at risk due to expiring patents by 2030 [4] Valuation and Market Conditions - The healthcare sector is viewed as undervalued, presenting opportunities for investors seeking capital growth [6] - Macroeconomic pressures such as high-interest rates and inflation are easing, while demand for healthcare remains strong [6]