To The Moon

$Medtronic PLC(MDT)$ has no shortage of innovations, with the medical device giant boasting a bevy of cutting-edge products that, in turn, generate billions of dollars in revenue and profits for the company. However, the company's growth potential has not reached its limit, and artificial intelligence (AI) has the potential to become a new growth engine. Recently, Medtronic teamed up with $NVIDIA Corp(NVDA)$ for an AI project.

Medtronic will use Nvidia's AI technology to detect precancerous tissue early and improve patient outcomes, and the medical device giant sees AI as the key to personalized medicine.

First, let's briefly talk about some background on Medtronic and AI.

Medtronic is not the first day to explore and use AI, and it has already achieved results. Last year, the company's UNiD Spine Analyzer 4.0 platform was approved by the U.S. Food and Drug Administration (FDA), making it the only approved predictive model for spinal surgery. This is a large surgical database powered by an algorithm, so doctors can better predict the final spinal alignment and thus better plan surgery.

Bob White, executive vice president of Medtronic's medical and surgical product portfolio, said that AI is the key to unlocking a new stage of personalized medicine in the 21st century. The company has even defined a set of "AI Guidelines," a list of guiding principles for the company's use of AI in medical processes. So we can say that Medtronic has gone all-in on AI.

Let's continue to return to the latest news. Medtronic is already using its AI tool GI Genius to detect polyps that can lead to colorectal cancer, and now the company plans to integrate Nvidia Holoscan and Nvidia IGX to further help doctors spot precancerous lesions with "AI-enhanced" diagnostic images. The purpose of this partnership between the two companies is to build a large AI platform that will gradually improve diagnosis and achieve better outcomes, while AI tools created by third-party developers may be distributed through GI Genius.

Growing AI Healthcare Market

According to the forecast of Grand View Research, from next year to 2030, the global AI medical market will continue to expand at a compound annual growth rate (CAGR) of more than 37%. In addition, according to GlobalData, Medtronic is one of the top five medical device companies that will dominate the AI medical market in the future.

Of course, the competition will be fierce, and other medical device giants, such as $Johnson & Johnson(JNJ)$ , spent nearly $15 billion on research and development last year. We don't have full-year figures for Medtronic yet, but in the first nine months of the fiscal year, the company spent about $2 billion on R&D. Johnson & Johnson is clearly ahead in this regard, but the AI medical market is large enough to accommodate Medtronic.

Profit and Growth

Medtronic's Nvidia AI deal is a big plus, but that alone isn't a reason to buy the stock, we must also consider the company's earnings profile and growth prospects.

Straight to the conclusion: after looking at earnings and growth, there are more reasons to buy Medtronic stock. The company's earnings continued to grow. On the one hand, the company divested the patient monitoring and respiratory intervention business to streamline its product portfolio, and on the other hand, it promoted future growth through acquisitions, such as Affera. In the past year, Medtronic has more than 150 products approved in major regions, and the growth rate of R&D investment is equal to or even higher than the growth rate of revenue.

Is it expensive to buy such an excellent medical stock? Medtronic stock is trading at a static P/E (trading 12-month earnings) ratio of 29, roughly the lowest it's been in the past 10 years, and pretty cheap.