Unlocking AI Potential in Energy, Healthcare, Utilities

Artificial intelligence (AI) has emerged as the leading narrative shaping the stock market landscape today. The largest companies within the S&P 500 are predominantly engaged in developing the essential hardware and software infrastructure that powers AI technologies. However, the enduring potential of AI extends far beyond mere transactions among major technology giants. For the massive investments pouring into AI data centers to prove worthwhile, this technology must generate tangible, real-world advantages across various industries.

Last year marked a notable advancement in the technology sector through the integration of AI, particularly in making coding more approachable and efficient. According to James Flintoft, head of investment solutions at AJ Bell, these improvements are now permeating other industries, where the duration required for handling and submitting paperwork has been dramatically shortened. As numerous markets, spanning from the United States to Taiwan and Korea, remain fixated on the evident participants in the AI supply chain, investors are wise to pivot toward sectors poised to reap substantial rewards from AI’s expanding role in the practical, everyday economy.

With AI’s influence stretching well beyond the confines of the technology sector, which real-world industries are best positioned to experience positive transformations from this technology? Furthermore, what strategies should investors employ to effectively position themselves within these promising areas?

Healthcare and AI

The healthcare and biotechnology fields have consistently been highlighted as prime candidates to capitalize on AI advancements. These sectors are characterized by their heavy reliance on vast datasets, coupled with persistent labor shortages—a perfect scenario for AI to excel and drive efficiencies. Currently, one of the most significant hurdles in the industry remains the drug discovery process. Developing new medications often spans several years due to the rigorous clinical trial phases, each fraught with substantial failure risks. Yet, treatments identified through AI methodologies hold the promise of drastically compressing these development schedules.

Prominent healthcare firms are beginning to document notable decreases in the time required for data processing tasks, such as preparing regulatory submissions and documentation for drug testing protocols. Meanwhile, healthcare providers are adopting superior diagnostic tools and implementing more cohesive patient care strategies, Flintoft observed. These developments may only scratch the surface of AI’s transformative capabilities in healthcare. For instance, companies such as Intuitive Surgical are pioneering robotic innovations directly within operating rooms, enhancing precision and outcomes. Looking further ahead, ventures like Elon Musk’s Neuralink are pioneering groundbreaking brain-computer interface technologies that could redefine human capabilities in the near term.

For those seeking exposure to AI-fueled trends in healthcare via investment trusts, options like the Worldwide Healthcare Trust or the Polar Capital Global Healthcare Trust stand out. Both are trading at discounts below the sector average and have delivered impressive share price appreciations—133% and 176%, respectively—over the decade ending January 29, as reported by the Association of Investment Companies. These vehicles provide a diversified gateway into the evolving landscape of AI-enhanced medical innovations, allowing investors to benefit from accelerated research, improved diagnostics, and novel therapeutic approaches without needing to select individual stocks.

Utilities and Energy

Another compelling real-world opportunity propelled by AI lies in the surging demand for energy. This theme operates at the opposite spectrum of the value chain compared to healthcare: whereas AI providers are equipping healthcare entities with cutting-edge tools, they themselves depend on ramping up energy usage to sustain their operations. Flintoft points out that utilities and the broader energy sector are primed to profit from escalating global energy requirements, fueled by the relentless construction of AI data centers worldwide.

Moreover, the market appears to undervalue the risks stemming from geopolitical tensions and potential disruptions in supply chains within energy sector pricing. The sustained relevance and critical strategic role of conventional oil and gas resources are similarly overlooked in current valuations. To gain targeted access to this burgeoning theme, Flintoft recommends exchange-traded funds such as the iShares S&P 500 Energy Sector ETF and the iShares S&P 500 Utilities Sector ETF. These instruments offer broad, cost-effective exposure to the companies driving energy production and distribution, which are essential to support the power-hungry infrastructure of AI expansion.

The interplay between AI and energy underscores a fundamental economic shift: as computational demands skyrocket, the need for reliable, scalable power sources intensifies. This dynamic not only bolsters utility providers through steady revenue growth from heightened consumption but also revitalizes interest in traditional fossil fuel assets amid supply uncertainties. Investors tapping into these ETFs can hedge against volatility while positioning for long-term gains driven by AI’s insatiable energy appetite.

In summary, AI’s proliferation promises to elevate productivity and profitability across diverse segments of the real economy, far removed from the tech-centric hype. By focusing on healthcare’s data-driven efficiencies and the energy sector’s indispensable support role, investors can strategically capture value from AI’s practical applications. These sectors exemplify how technological breakthroughs translate into measurable economic impacts, offering robust opportunities for portfolio enhancement in an AI-dominated future.