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Dario Amodei, the CEO of Anthropic — the company now paying SpaceX $1.25 billion per month for AI compute— said something last month that stopped me cold.
“I’m positive on biotech. I think biotech is about to have a renaissance… ultimately driven by AI,” Amodei said. “My instinct is we’re about to cure a lot of diseases.”I’ve been at this for 28 years. CEOs talk. But when the person running one of the two most important AI labs on earth makes a statement that bold, you don’t ignore it. You ask one question.
Where is the money already moving?
Twenty-eight years on a trading floor taught me that the best AI drug-design tool in the world isn’t for sale. Isomorphic Labs — the Alphabet-backed spinout led by Nobel laureate Sir Demis Hassabis — just raised $2.1 billion in the largest Series B in AI-drug-discovery history. The IsoDDE platform, which some experts are calling “AlphaFold 4 in effect,” is privately held. You cannot buy a share of it.
What you can buy is the supply chain underneath it. The small-cap public companies — all under $20 billion — that are using AI to design real drugs, signing real deals with Big Pharma, and where institutional investors are already building positions.
That’s the trade. Follow the money, not the cure.
Why This Moment Is Different From Every Previous Biotech Hype Cycle
Biotech has had AI hype cycles before. This one is different for three specific reasons.
The deals are real, and the numbers are enormous. AI and machine-learning-related biopharma deals approached $10 billion in 2024 alone. In March 2026, Eli Lilly signed a collaboration with Insilico Medicine worth up to $2.75 billion — the largest AI-era pharma deal in history. Lilly also signed a $1.75 billion pact with Isomorphic Labs. Novartis signed with Generate: Biomedicines. Roche signed with Dyno Therapeutics for up to $1.05 billion. These are not pilot programs. These are full-scale R&D commitments by the largest drug companies on earth.
When pharmaceutical companies that spend $5-6 billion annually on R&D start writing checks this size to AI platforms, they are not experimenting. They are reorganizing their entire drug-discovery infrastructure around a new paradigm.
Drugs designed by AI are entering human trials. This is the most important fact in the entire category and the most underreported. More than 173 AI-discovered drug programs are now in clinical development globally. Between 15 and 20 of them are expected to enter pivotal Phase III trials in 2026 — the cohort that will decide whether the entire decade-long AI-drug-discovery thesis was real or fashion.
Insilico Medicine’s AI-designed drug for idiopathic pulmonary fibrosis — the first drug designed entirely by generative AI to enter human Phase II trials — is already in patients. Isomorphic Labs expects to file its first Investigational New Drug application by end of 2026. These aren’t press releases. They’re IND applications.
The best tool is private. This is the most important structural point for investors. Isomorphic Labs just raised $2.1 billion to stay private. Their IsoDDE platform is not for sale. You cannot buy Alphabet specifically for this exposure — the SpaceX stake, cloud business, and advertising revenue dwarf the Isomorphic position. The only way to express this thesis in the public market is through the companies that are using similar approaches to design actual drugs — and where the institutional money is starting to move.
That’s the picks-and-shovels side of the AI biotech renaissance. Here are six names.
How to Position in AI Biotech Stocks Before the Re-Rating
Same framework I use on every trade. Notice. Map. Ask who forgot to move. Structure the risk.
The notice here is obvious — Dario Amodei’s statement, the $10 billion in Big Pharma AI deals, 173 drugs in clinical development, the $2.1 billion Isomorphic raise.
The map is the public companies using the same category of AI-drug-design approaches: computational chemistry, phenomics, generative protein design, physics-based molecular simulation.
The ask is where the institutional money is moving and which names haven’t yet been re-rated to reflect the AI thesis.
The structure is what you decide before you click buy. This basket carries real binary risk — drug development fails more often than it succeeds, and AI doesn’t change that math as dramatically as the hype suggests. Size accordingly.
Bucket 1: Top 2 AI Drug Discovery Stocks to Own Now
If you only buy two names from this thesis, buy these.
Recursion Pharmaceuticals (RXRX) — ~$1.67B market cap
Recursion is the most integrated AI-drug-discovery platform in the public market. They run one of the world’s largest automated biology labs — millions of experiments per week — combined with AI models that map how genetic and chemical perturbations change cell biology. The merger with Exscientia in late 2024 combined Recursion’s phenomics platform with Exscientia’s generative chemistry engine, creating the most comprehensive end-to-end AI drug discovery pipeline among publicly traded companies.
The pipeline includes an oncology CDK7 inhibitor in Phase I/II, an RBM39 degrader in Phase I/II, and a rare disease program in Phase II. Partners include Roche, Sanofi, Bayer, and Merck KGaA. More than $1 billion in potential milestone value sits in active collaborations.
The stock is trading at $3.35, down 81% from its 2021 IPO price of $18. The 52-week range is $2.77 to $7.18. Analyst consensus price target is $6.64 — nearly 100% upside from current levels.
I have to be honest about the counter-signal. Recent Form 4 filings show CEO Najat Khan and a director have sold shares. I always check insider activity, and selling by senior management is a flag worth watching. That doesn’t disqualify the thesis — it adjusts the position sizing. This is a call option on a real platform, not a core holding. Size it like one.
Schrödinger (SDGR) — ~$2.1B market cap
If Recursion is the biology-first platform, Schrödinger is the chemistry-first platform. Schrödinger’s physics-based simulation software is used by over 1,600 pharmaceutical and biotech researchers — the largest installed base of any computational chemistry platform in the industry. They’ve been at this longer than anyone, and their software business gives them a recurring revenue base that most pure-play AI biotechs don’t have.
I shared SDGR on Masters in Trading Live on April 8, 2026. The position is up 28% since that call. I cover setups like this every weekday at 11 AM ET — free, live, on YouTube.
The business model is unique: software-as-a-service revenue today, drug royalties tomorrow. When Schrödinger’s computational chemistry identifies a drug candidate and licenses it to a pharma partner, the company earns milestones and royalties on commercial success — without having to run a clinical trial themselves. Annual contract value is expected to grow 10-15% in 2026.
The risk is clear. The company is still reporting significant losses — $60 million in Q1 2026 alone. Management expects operating expenses to fall meaningfully in 2026, but this is not a company that is near profitability. Buy for the platform moat and the royalty pipeline. Not for near-term earnings.
Bucket 2: 3 More AI Drug Discovery Stocks for Full Exposure
Eikon Therapeutics (EIKN) — ~$1.5B market cap
The newest publicly traded name in this basket. Eikon raised $350 million in a Series D in February 2025, then IPO’d in February 2026, raising an additional $381 million. Total funding now sits around $1.5 billion. Eikon’s approach is distinct: they use live-cell super-resolution microscopy and AI to watch drug-protein interactions happen in real time inside living cells — something no other platform in the category does. The technology was developed at UC Berkeley and Stanford.
They’re pre-revenue with a clinical-stage pipeline anchored by EIK1001, which is in Phase 2/3 development. This is the highest-risk name in the basket. But Eikon’s approach addresses the biggest failure point in AI drug discovery — the gap between predicting how a drug binds to a protein in silico and understanding what it actually does inside a living cell. That gap has been the graveyard of more promising drug candidates than any other single problem in the field. If Eikon’s live-cell platform proves out, the technology has the potential to be licensed across the entire industry.
Tempus AI (TEM) — ~$8B market cap
The data layer. While the other names in this basket are focused on designing new drug molecules, Tempus has built the largest repository of multimodal clinical and molecular data in medicine — over 8.6 million patient records, genomic profiles, imaging data, and clinical outcomes. That data is what the AI models that design drugs need to be trained on and validated against.
Tempus went public in June 2024 and has been steadily building partnerships with pharma companies that need clinical data to train their AI models. The business includes both a data-licensing revenue stream and an AI-enabled oncology diagnostics business. Less binary than the pure-play drug designers, more durable revenue, lower upside. The anchor position in the basket for investors who want exposure with a lower risk profile.
Absci Corporation (ABSI) — ~$1.5B market cap
The antibody specialist. Absci’s Integrated Drug Creation platform uses generative AI to design novel antibodies against difficult-to-drug targets, then validates them in their own wet lab — combining computational design with experimental verification in a single loop. Total funding around $228 million, with recent partnerships with AstraZeneca and partnerships across oncology and autoimmune disease.
Yesterday, Absci announced early proof-of-concept data from its ABS-201 hair loss program and priced a $100 million equity offering led by Eli Lilly, which committed $40 million. The stock surged 36% on the news. That kind of institutional validation from the same pharma giant writing nine-figure checks to Isomorphic Labs is not a coincidence.
The smallest name in the basket and the most speculative. Absci is building exactly the kind of integrated AI-plus-wet-lab platform that the Isomorphic Labs raise validated at massive scale. The question is whether this company can build the same moat. Position accordingly.
Bucket 3: The Picks-and-Shovels AI Drug Discovery Play
Nvidia (NVDA)
Every drug-design AI model runs on Nvidia silicon. Recursion runs on it. Schrödinger runs on it. Isomorphic runs on it. The AI compute that makes AI drug discovery possible is almost entirely Nvidia. This is not a new observation — everyone knows Nvidia. But in the context of this basket, it’s the non-binary way to be in the AI biotech trade. No drug development risk. No clinical trial binary. Just the picks-and-shovels infrastructure that every player in the category needs.
If you’re uncomfortable with the binary risk in RXRX, SDGR, EIKN, and ABSI, Nvidia is how you express conviction in the AI drug-discovery thesis without expressing conviction in any individual company’s pipeline. Jensen Huang explicitly cited Eli Lilly at Davos 2026 as a prime example of pharma giants making the leap to AI platforms. Nvidia is how you own that statement.
The Catalysts That Will Move These Stocks
Three signals to watch. These are the kind of setups I track in real time on Masters in Trading Live every weekday at 11 ET — but you don’t need a service to follow them. You need to know what to look for.
Phase III trial readouts in 2026. Between 15 and 20 AI-designed or AI-discovered drug programs are expected to enter pivotal Phase III trials this year. The first program from the current generation of AI-first platforms to produce a positive Phase III readout will re-rate the entire category. One successful trial proves the thesis. Watch the Recursion pipeline specifically — they have multiple near-term readouts expected in 2026.
Isomorphic Labs Phase 1 trial. Demis Hassabis has publicly committed to entering Phase 1 clinical trials with Isomorphic’s first AI-designed drug candidate by end of 2026. The moment Isomorphic doses its first patient, every public company in the AI-drug-discovery space gets repriced. Isomorphic is the category benchmark. Their first clinical trial is the signal the market has been waiting for.
Big Pharma partnership expansions. The $2.75 billion Lilly-Insilico deal in March 2026 was not the last mega-deal. Novartis, Roche, Sanofi, Bayer, AstraZeneca, and Merck are all actively expanding AI partnerships. Each new nine-figure collaboration announcement re-rates the public companies in this basket by demonstrating that institutional pharmaceutical capital is flowing into the category at increasing scale. Watch pharma 10-Qs for line-item movement around AI collaborations.
Being Honest About What Could Go Wrong
This is not a one-way trade. I want to be straight about the risks because they’re real.
Most drugs fail. AI improves the odds of finding good drug candidates. It does not solve the fundamental problem that more than 90% of drug candidates that enter clinical trials never reach approval. AI compresses timelines and reduces attrition in early-stage discovery. It does not eliminate late-stage trial failure.
Insider selling at Recursion. I mentioned it in the RXRX section. The CEO and a director have sold shares recently. I always look at Form 4 filings, and selling by senior management is a flag I don’t ignore. It doesn’t disqualify the thesis — it adjusts the conviction and the position size.
The “AI” label may be overstated for some names. Not every company that calls itself “AI drug discovery” has a genuine AI-first platform. Some are traditional biotech companies with a machine-learning wrapper around legacy discovery processes. Recursion, Schrödinger, and Eikon have documented technically differentiated platforms. Be more skeptical of names that entered the category opportunistically.
Time horizon. This is not a 2026 trade in the sense that drugs will be approved in 2026. This is a multi-year thesis. The catalysts that will move these stocks in 2026 are partnership announcements, pipeline milestones, and IND filings — not revenue. Size positions to reflect that you’re buying a thesis that may take 3-5 years to fully play out.
The Bottom Line on AI Drug Discovery Stocks
The best AI drug-design tool in the world is private. Isomorphic Labs raised $2.1 billion to stay that way. Alphabet owns it, but Alphabet’s advertising business, cloud revenues, and SpaceX stake dwarf the Isomorphic position — you can’t buy Alphabet and move the needle on this thesis.
What you can buy is the six names above. Three focused platforms using AI to design drugs at every stage from target identification to clinical development. One clinical data layer. One speculative pure-play. And Nvidia as the non-binary picks-and-shovels way to own the entire category without picking a single pipeline winner.
Dario Amodei thinks AI is about to give biotech a renaissance. $10 billion in pharma AI deals in 2024 suggest the largest drug companies on earth already agree with him. More than 173 AI-designed drug programs are in human clinical trials right now — and 15 to 20 of them hit Phase III this year.
The chips trade is famous. The power trade is in motion. The cooling trade is getting noticed. The AI drug discovery trade is where institutional capital is quietly building positions while retail investors are still trying to buy SpaceX at the open.
The cure is coming. The money is already moving.
Follow both.
Editor’s Note: Elon Musk has spent 27 years waiting for this moment. Now, it’s rolling out across America… and has the potential to be 15X-bigger than SpaceX. Luke Lango, who called Palantir, AMD, and Nvidia before they soared, says Musk’s latest rollout is the biggest wealth-building opportunity of his career. He’s giving away one free stock pick in this presentation.
Frequently Asked Questions
What is AI drug discovery, and why does it matter for investors? AI drug discovery uses machine learning, computational chemistry, and generative AI models to identify and design new drug candidates faster and more accurately than traditional trial-and-error methods. For investors, it represents a potential compression of the drug development timeline — which historically takes 10-15 years and over $2 billion per approved drug — into a fraction of that cost and time.
Is Recursion Pharmaceuticals stock a buy? Recursion has the most comprehensive integrated AI-drug-discovery platform among publicly traded companies, with an active pipeline, major pharma partnerships, and a stock trading 81% below its 2021 IPO price. The risks include ongoing losses, no approved drugs yet, and recent insider selling by the CEO and a director. Treat it as a call option on a real platform rather than a core holding, and size accordingly.
Why can’t I just buy Isomorphic Labs stock? Isomorphic Labs is privately held by Alphabet and external investors, including Thrive Capital, GV, and sovereign wealth funds. The company raised $2.1 billion in May 2026 specifically to continue scaling its AI platform while remaining private. The only public route to the AI drug-discovery thesis is through the publicly traded platforms that use similar approaches.
Jonathan Rose is a former CBOE market maker and the founder of Masters in Trading at InvestorPlace. He hosts Masters in Trading Live every weekday at 11 AM ET. Follow him on X at @JRoseTrades.
