An adviser’s guide to investing in healthcare data and wearables
Separating signal from noise in the AI-backed healthcare and wearable devices sector is complex, requiring specialist research and active management to navigate. Today’s newsletter has a somewhat different ‘look and feel’ as FAnews shares investment insights from a Q&A interview with Dr Jimmy Muchechetere, Global Healthcare and Industrials Equity Research Analyst at Investec Investment Management.
Investing in healthcare AI and data
Financial advisers should find some value in seeing how equity analysts interrogate investment themes that may not be directly accessible through local markets. In the case of healthcare innovation and wearables, the investment case often rests less on device sales or subscriptions, and more on how the data they generate is monetised through insurers, hospital groups or pharmaceutical research.
The QNA interrogated the factors advisers and investors should keep an eye on as they try to identify healthcare AI and data opportunities with the potential to generate sustainable earnings and returns in 2026 and beyond. Muchechetere’s advice was to monitor both adoption and economics. “Metrics like recurring revenue growth, gross margins, net dollar retention and customer lifetime value are far more telling than user numbers alone,” he said. Key questions include: Is usage increasing? Are customers renewing? And are revenues growing faster than costs?
Following the money
FAnews: From an equity research perspective, where is global capital actually flowing in wearable-enabled healthcare today, and what is driving those allocations?
Dr Muchechetere: Global capital is not flowing blindly into ‘wearables’ as a category, but rather toward outcomes. Investors are backing businesses where wearable data reduces healthcare costs, improves outcomes or enables earlier intervention. This means capital is concentrating around platforms that sit on top of devices rather than the devices themselves. Investors also look closely at the data and scalability potential in each opportunity.
The real value drivers centre around how a solution addresses the challenges associated with chronic disease management, ageing populations and overstretched healthcare systems. Payers and providers are under pressure to move from episodic care to continuous monitoring, and wearables make that possible. When wearable data feeds into AI-driven analytics or care pathways that show measurable cost savings, capital follows quickly.
The sweet-spot for investing in wearables
FAnews: Which parts of the wearable ecosystem are proving most investable: device manufacturers, component suppliers, data platforms or healthcare service providers?
Dr Muchechetere: From an investment perspective, the most attractive opportunities sit above the hardware layer. Device manufacturing is costly, competitive and often cyclical … and margins are thin unless you have strong ecosystem lock-in.
Data platforms and healthcare service providers that can translate wearable data into actionable insights are far more compelling. These businesses benefit from recurring revenue, higher margins and strong network effects. Component suppliers can be interesting, particularly where intellectual property is defensible, but the real long-term value accrues to companies that own the data relationship and integrate these into clinical workflows.
FAnews: Many investors see wearables as consumer tech. What needs to change for this category to be treated as part of healthcare infrastructure?
Dr Muchechetere: This shift will happen once wearables stop being about steps, sleep and personal optimisation and become more embedded into care delivery and reimbursement models. The perception will change once wearable data is more trusted by clinicians.
Global brands with potential
FAnews: Which global companies are best positioned to capture the financial upside of using wearable data to improve health outcomes?
Dr Muchechetere: Scaled risk-bearers that run device-agnostic incentive models are well positioned to benefit from wearable data. This includes groups such as United Health, CVS/Aetna, Humana and major life insurers like John Hancock, which can use data to influence outcomes and manage risk without manufacturing devices. Platform providers that enable opt-in and cross-device data sharing at population scale could also benefit, with the likes of Google, through its Health Connect and cloud and AI capabilities, and Apple’s health ecosystem.
FAnews: How important is regulatory and clinical validation in separating investable healthcare wearables from speculative technology plays?
Dr Muchechetere: Trust is currency in healthcare and without regulatory approval, clinical evidence and robust data governance, wearable-enabled businesses will struggle to scale beyond early adopters. In this context, regulatory and clinical validation is critical.
From an investment perspective, regulatory validation significantly de-risks cash flows and extends product longevity. Regulation also acts as a defensive moat, creating a barrier to entry for competitor firms. Speculative technology may generate headlines, but sustainable returns tend to come from companies that can operate within the healthcare’s regulatory frameworks, not around them.
Identifying mis-priced opportunities
FAnews: Are valuations in AI-enabled healthcare already pricing in widespread adoption of wearables, or is there still genuine mis-pricing in parts of the market?
Dr Muchechetere: Where monetisation is clear and evident, AI-enabled healthcare has been priced in. Insurers are yet to see a tangible impact on profits, and as a result, there is little credit built into current valuations. Many of the pure-play AI healthcare companies also remain small or privately held, which limits how fully these themes are reflected in public market pricing.
FAnews: Beyond wearables, where are you seeing the most compelling opportunities across AI-enabled healthcare more broadly?
Dr Muchechetere: Diagnostics is a major opportunity, especially in areas like AI-assisted imaging and pathology. Accuracy and speed in this discipline translates into better outcomes and lower costs. Data analytics platforms that help health systems manage risk, utilisation and population health are also attractive.
Automation in care delivery from administrative workflows to robotic-assisted surgery also continue to gain traction as healthcare systems try to do more with fewer clinicians. In pharmaceuticals, AI-enabled drug discovery and trial optimisation are improving capital efficiency, even if revenue realisation takes longer.
FAnews: The big healthcare story in recent years has been the so-called fat loss drugs Wegovy and Ozempic. Are prospects for these drugs still influencing buy-and-hold decisions for pharma stocks, and how do these companies stack up against AI healthcare and wearable opportunities?
What about the obesity drug plays?
Dr Muchechetere: Yes, anti-obesity drugs continue to dominate the narrative in healthcare stocks, and with an estimated addressable market of around $150 billion per year, they remain the key investment theme in the sector, dwarfing other opportunities, including AI-enabled healthcare and even oncology.
FAnews: How can a South African financial adviser get access to global healthcare themes? Do you rate any of the country’s listed hospital or pharma groups?
Dr Muchechetere: For advisers, the most effective route is through global pooled vehicles that provide diversified exposure to healthcare innovation across pharma, Medtech, AI and services. Using a pooled vehicle reduces single-stock risks by differentiating across the theme. Locally, South Africa’s listed hospital groups offer defensive characteristics, but growth is constrained by regulatory and funding pressures.
An offshore play for now
That’s it for the QNA, except to explain that pooled investment vehicles refer to offshore unit trusts, global healthcare funds or thematic exchange traded funds (ETFs) that offer investors diversified exposure to the theme without single stock risk.
South African advisers who wish to steer their clients towards the AI healthcare and data themes will have to consider offshore opportunities, where many companies are already leveraging wearable data to identify risks, improve treatment pathways and support drug development. Healthcare innovation can create extraordinary shareholder value and investment returns, but only when backed by sustainable business models.
Writer’s thoughts:
Global healthcare innovation is moving from consumer tech into health management, research and treatment. Are your clients getting adequate exposure to this theme, and what is your preferred investment vehicle? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
