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Key Points
Talk of an AI bubble bursting is on the up, and a Kepler Cheuvreux analyst told CNBC that healthcare was the sector for investors looking for shelter. Sky-high valuations and uncertain returns on investment have fueled talk of a bubble for months, but the conversation intensified after investor Michael Burry, known for predicting the 2008 financial crisis, revealed he is shorting AI players like Nvidia and Palantir. Arnaud Girod, head of economics and cross asset strategy at Kepler Cheuvreux, told CNBC’s Squawk Box Europe on Friday that healthcare’s position was “the exact opposite” of anxiety around AI. “We are putting behind us a lot of headwinds like the tariffs,” he said. He added that healthcare was benefiting from AI driving efficiencies and innovation in the sector. Investors “need to find businesses where the franchises are not going to be challenged by the AI disruption itself and, at the same time, companies that could leverage the technology either through cost cutting, efficiencies, productivity, or indeed, incremental innovation,” Girod said. Despite a recent slowdown, U.S. tech stocks have rallied this year, with the S & P 500 Information Technology Index up 24.8% year-to-date, compared with, which is up the S & P 500 Health Care Index 11.6%, and the Stoxx Europe 600 Health, up just 2.7%. AI is driving about 40% of the U.S. market, Girod said. Megacaps such as Alphabet , Meta and Microsoft are spending billions to build out data centers, and massive deals have been announced by OpenAI, Nvidia and others. ‘The ultimate hedge against an AI correction’ Pharma, which makes up the bulk of healthcare indexes, has recently seen overhangs removed. For now, companies can dodge tariffs by pledging investments in U.S. manufacturing, and President Donald Trump’s most-favored-nation drug pricing turned out better than feared. “The recovery in Pharma stocks could accelerate as visibility improves after this year’s perfect storm and as the sector’s longer-term structural themes regain traction (ageing demographics, obesity),” Kepler Cheuvreux analysts wrote as they upgraded European healthcare to Strong Overweight from Overweight in their quarterly playbook published earlier this week. They said it “could be the ultimate hedge against an AI correction in 2026.”
