“I think biotech is about to have a renaissance… ultimately driven by AI.”
Dario Amodei
For most of this cycle, market leadership has been extraordinarily narrow. Technology (XLK) remains the only major sector firmly established in the leading quadrant of the Relative Rotation Graph above.
And even within technology, much of the strength has remained concentrated in semiconductors and the physical infrastructure required to build artificial intelligence.
But something important may now be changing.
Healthcare (XLV in the chart above) is beginning to gain relative momentum. The sector remains in the lagging quadrant, so we should not declare a new leadership regime prematurely.
Still, the direction of travel matters.
After years of persistent underperformance, healthcare is beginning to rotate higher precisely as investors search beyond the most crowded AI winners.
The IXJ 0.00%↑ chart provides the first confirmation.
Our global healthcare position has broken above a major resistance zone and is now attempting to escape a long relative-strength downtrend against the broader equity market. The move has also occurred with price comfortably above its rising 20- and 50-week moving averages.
That is constructive.
It suggests that healthcare may be doing more than participating in a temporary defensive rotation. The sector could be entering a more durable period of market recognition after years of depressed valuations, political uncertainty, and capital scarcity.
There are several reasons why.
Large pharmaceutical companies face an increasingly urgent need to replace revenues threatened by patent expirations. Biotechnology financing and M&A activity are recovering. And perhaps most importantly, artificial intelligence is moving from an abstract promise toward a practical tool for drug discovery, molecular design, patient selection, clinical development, and operational efficiency.
That last point has always been central to our thesis. The first phase of the AI boom rewarded those building the intelligence layer: semiconductors, memory, data centers, and power infrastructure.
The next phase may reward the sectors capable of applying that intelligence to some of the world’s most complex and valuable problems.
Healthcare sits near the top of that list.
Dario Amodei, the CEO of Anthropic, recently argued that biotechnology may be entering a renaissance ultimately driven by AI. His point was not that algorithms will magically eliminate the physical realities of clinical trials, regulation, manufacturing, and commercialization.
It was that biology contains design spaces far too complex for human intelligence to navigate efficiently on its own.
AI may change that. And the market appears to be reaching a similar conclusion.
Our biotech position through SBIO 0.00%↑ has already broken decisively to multi-year highs.
Relative strength is improving, and the position is now approaching an 80% gain from our original recommended price.
This is important for two reasons.
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First, biotechnology often acts as the higher-beta expression of a broader healthcare rotation. Its outperformance suggests that investors are not merely hiding in defensive pharmaceutical companies. They are beginning to reward innovation.
Second, it confirms that the opportunity we identified while the sector remained deeply unpopular is becoming increasingly consensual. That does not mean the trade is over.
Quite the opposite.
SBIO may be showing us where IXJ is heading. We will still demand confirmation. Breakouts can fail, and healthcare carries regulatory, scientific, and political risks that should never be minimized.
But the message from the charts is becoming harder to ignore.
Healthcare is gaining relative strength.
IXJ is breaking out.
SBIO is already leading.
The AI trade may be beginning to migrate from chips to cures.
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Good investing!
Vasco Marques de Freitas, CFA, CMT
A quick note on accountability.
We don’t publish these theses to be right on paper. We publish them to express edge in the real economy. Our Leaderboard shows the exact scorecard since inception, tracking every position, our compounding outperformance against the market, and the triple-digit winners we’ve captured along the way.
You can view the exact numbers on our Leaderboard.
Important Disclosure
This publication contains general investment research produced by Vasco Marques de Freitas, CFA, CMT, Founder and CEO of VMF Research, Lda. The analysis and market data are stated as of 2 July 2026, 4:00 p.m. Eastern Time, the latest New York market close before publication on 4 July 2026. It is not personalised investment advice and does not consider any reader’s individual objectives, financial circumstances or tolerance for risk.
The Tier One Model Portfolio is an illustrative research portfolio and does not represent client assets or transactions executed by VMF Research. References to portfolio positions relate solely to that Model Portfolio.
Healthcare and biotechnology instruments, including IXJ and SBIO, involve substantial market, scientific, clinical, regulatory and political risks. Technical breakouts may fail, and investors may incur material losses. Views are reviewed through VMF Research’s monthly publications and may be updated weekly or ad hoc.
Disclosure of interests: as of the research cut-off, neither VMF Research, the author personally, nor legal entities controlled by the author held positions in IXJ or SBIO.
Past performance is not indicative of future results.