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On the surface, the FTSE 100 is seriously underrepresented when it comes to artificial intelligence stocks. The index is stuffed with ‘dinosaur stocks’ in sectors like oil, tobacco and mining rather than pioneering tech companies at the forefront of AI.
This could be a problem if this exciting technology lives up to the claims of being transformative to our economy and way of life. An investor looking to take advantage of the AI revolution should look elsewhere, right?
Why large language models?
Not so fast!
While some of the main players in AI are big tech firms like Nvidia, Alphabet or Palantir, the companies that might benefit the most from it might not be the ones producing the chips or the algorithms at all. And because of their lack of direct involvement, the shares could be undervalued today.
There are perhaps a number of stocks that fit the bill here, but the one I’m curious about today is AstraZeneca (LSE: AZN). The £220bn market cap pharma giant has been making headlines already in 2026. The firm recently acquired Boston-based Modella AI whose ‘AI agents’ can be used to help oncology research.
Why can AI help pharmaceuticals companies? Drug discovery is the main advantage. Sifting through vast quantities of data is AI’s forte, and this can help identify potential drug targets. Speedier discovery can help big companies find those ‘blockbuster drugs’ that help millions of patients and bump up the bottom line.
The journey from drug discovery to release is a long one. So the fruits of the introduction of AI might not be felt for five to 10 years. In this vein, CEO Pascal Soriot has set an $80bn target for AstraZeneca’s revenue by 2030. Therefore this is the kind of long-term play that we like to aim for here at The Motley Fool.
Upcoming years
What are the negatives here? Well, it’s an expensive and ruthlessly competitive space. We’ve seen this with the so-called obesity race where drug manufacturers have been clamouring to get appetite-suppressing drugs out to a very hungry market (pun intended).
AstraZeneca is lagging behind Eli Lilly and Novo Nordisk in this area. Although the recent deal with CSPC Pharmaceuticals to use an AI-driven platform to develop weight loss drugs might be another example where artificial intelligence helps the business.
Another potential downside is the valuation. AstraZeneca has proven itself to be one of the bona fide FTSE 100 growth stocks. It’s now (depending on the day) sometimes the largest Footsie company and is trading at 30 times earnings. Pretty expensive for London’s leading index!
To sum up? We’re in the very early stages of artificial intelligence. Over the next decade, we could see some drastic changes in the fortunes of many businesses using the technology. I think AstraZeneca has a real chance of being one of the winners. Maybe not a no-brainer but I’d say it’s worth consideration.
This story originally appeared on Motley Fool
