The Future Is Now: 2 Medical Diagnostic AI Stocks to Snap Up

While interest in artificial intelligence (AI) continues to drive much of the action on the stock market, two medical diagnostic stocks are already significantly benefiting from AI: Butterfly Network (NYSE: BFLY) and GE HealthCare Technologies (NASDAQ: GEHC).

AI's ability to analyze large datasets is tailor-made for medical diagnostic tools: It can help reduce diagnostic errors, prevent unnecessary costs, and improve patient outcomes.

Incorrect diagnoses and delays in making correct ones can be disastrous for patients and expensive for the healthcare system. In the U.S. alone, each year, such errors affect 12 million people and cost the country over $100 billion in the aggregate, according to a report by the nonprofit Society to Improve Diagnosis in Medicine.

Image source: Getty Images.

Butterfly Network is turning things around

Butterfly's lead products are based on capacitive micromachined ultrasonic transducer (CMUT) technology, which enables a single semiconductor chip to replace much of the hardware found in a traditional large ultrasound machine. Last year, the company showed that it's making headway in its transition from a hardware-only seller to a software platform and AI company. After years of losing money, Butterfly Network just had its first quarter of positive cash flow. Its stock is up more than 9% so far in 2026 and more than 48% over the past year.

Traditional handheld ultrasounds often require separate probes for different body parts. Butterfly's single probe can emulate all three major transducer types (linear, curved, and phased array) simply by changing its software settings. And priced at roughly $3,000 to $4,000, the company's devices are less than 10% the cost of cart-based ultrasound machines.

Butterfly Network reported fourth-quarter revenue of $31.5 million, up 44% year over year, and cash flow of $6.3 million. It did post a bottom-line loss of $0.06 per share, but that was an improvement from its loss of $0.08 per share in the same quarter a year ago. Software and services accounted for 43% of total revenue, and that's important because software revenue delivers higher margins than hardware revenue.

GE HealthCare Technologies is adjusting to a big transition

GE HealthCare's shares are down more than 11% this year and over the past 12 months. The company, though it's more than 30 times larger than Butterfly Network, bears at least one similarity to it in that it, too, is moving away from its medical-device hardware and focusing more on AI software to solve specific problems, including image quality, hospital workflow, and precision care, matching the proper treatment to the right patient. Its primary AI strategy is the Edison Digital Health Platform, which has more than 40 AI applications.

The latest of its AI-powered applications to gain Food and Drug Administration (FDA) clearance is designed to deliver better CT scans for cardiology patients. The Photonova Spectra is an AI-enabled CT scan that counts and measures individual X-ray photons to provide better visualization of coronary anatomy, plaque development, and dose-conscious cardiac imaging.

In 2025, GE HealthCare reported revenue of $21.6 billion and EPS of $4.55, both of which were up 4.8%. In 2026, it's projecting organic revenue growth of between 3% and 4% and adjusted EPS growth of between 7.9% and 12.3%.

Which stock you'll prefer will depend on your risk tolerance

With the advances in medical science, medical professionals today often have the ability to gather more data about a patient than they can effectively analyze on their own. AI diagnostic tools can address that problem, rapidly analyzing vast amounts of data and providing insights to doctors that save lives and reduce treatment costs.

Butterfly Network, as a younger company with a disruptive technology in its niche, has higher growth potential -- but it's a riskier investment. It is not profitable, and it has less of a financial cushion against threats such as a potential economic downturn.

GE HealthCare, by contrast, is already profitable and well-established after spinning off from the former General Electric in 2023.

GE HealthCare's healthy cash flow is allowing it to pay down debt and make bolt-on acquisitions, including smaller AI and digital health start-ups, to refresh its tech stack. The company also offers far more product diversity than Butterfly. GE HealthCare is a more dependable company, and trading at around 14 times earnings and just 3 times sales. That may make it a safer bet. Its shares are unlikely to stay down for long.

James Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE HealthCare Technologies. The Motley Fool has a disclosure policy.