Beyond Tech Industry: Here's how Biotech ETFs Are Riding the AI Wave

Over the past couple of years, the integration of Artificial Intelligence (AI) has ignited a revolutionary shift within the biotechnology industry. By mining massive biological datasets, AI has been used in biotechnology for drug discovery for more than a decade, although its adoption was initially slow before accelerating rapidly in the mid-2010s.

Beyond identifying novel molecular structures, AI is now being leveraged to accelerate clinical trials, personalize patient care through genomics, and enhance diagnostic accuracy. Even biomanufacturing is seeing a radical overhaul, as AI-driven automation optimizes production efficiency.

As AI has now moved from the periphery to the very center of biotech innovation, it is creating substantial opportunities for profitability and growth, thrusting not only biotech firms but also the exchange-traded funds (ETFs) that hold them into the investor spotlight.

Before exploring the specific ETFs positioned to ride this AI wave, it is worth understanding how AI is accelerating the biotech industry and which firms stand to benefit the most. More importantly, is this momentum sustainable? Let’s explore this in the following sections.

The AI-Biotech Connection: Accelerating the Pipeline

Across the value chain, AI has moved from experiment to infrastructure in the biotech industry. Leading “AI first” biotechs now embed machine learning at the core of target identification, molecule design, and clinical strategy, with around 75% heavily integrating AI into discovery workflows.

Some of the prominent biotech firms that have integrated AI heavily in their systems are mentioned below:

Gilead Sciences GILD: This biotech giant is expanding its pipelines through AI-driven molecular modeling. Gilead has integrated AI to uncover novel therapeutic strategies in oncology and infectious diseases.

Vertex Pharmaceuticals VRTX: It harnesses machine learning to advance gene-editing technologies and has become a leader in using computational power to dominate niche markets like cystic fibrosis.

Regeneron REGN: This firm utilizes its "VelocImmune" platform and the Regeneron Genetics Center to decode complex disease mutations using genomics-based AI faster than ever before.

Moderna MRNA: It uses AI to optimize mRNA sequences, accelerating the development of personalized cancer vaccines.

This rapid "AI acceleration" helps the industry by increasing the "hit rate" of successful candidates while lowering R&D overhead. Consequently, the ability to succeed early translates directly into a more robust and profitable pipeline for these firms.

ETF Edge in an AI-Driven Biotech Boom

Moving through 2026, the global biotechnology sector continues to follow a strong growth trajectory, fueled by an aging demographic and escalating healthcare demands. The integration of high-fidelity biological data with advanced AI is enabling firms to decode complex disease mechanisms faster than ever.

While the potential is sky-high, the risks of investing in individual stocks remain significant, as a single failed Phase III trial can tank a company's share price overnight.

For investors interested in the biotech industry, Biotech ETFs offer a great alternative. They provide diversified exposure to the entire AI revolution, capturing the upside of the "winners" while mitigating the volatility of any single clinical failure.

Biotech ETFs Riding the AI Wave

Considering the above discussion, investors may want to keep the following biotech ETFs on their watchlist to benefit from the industry’s AI-driven growth without having to predict which specific startup will succeed.

iShares Biotechnology ETF IBB

This fund, with net assets worth $8 billion, offers exposure to 254 U.S. companies from the biotechnology industry. Its top three holdings include: GILD (9.80%), VRTX (9.21%), and Amgen AMGN (9.02%).

IBB has surged a solid 21.9% over the past year. The fund charges 44 basis points (bps) as fees. It traded at a good volume of 1.88 million shares in the last trading session.

State Street SPDR S&P Biotech ETF XBI

This fund, with net assets worth $7.29 billion, offers exposure to 151 large, mid, and small-cap biotech stocks. Its top three holdings include: MRNA (2.33%), Roivant Sciences (1.79%), and Arcellex (1.73%).

XBI has soared 38.5% over the past year. The fund charges 35 bps as fees. It traded at a good volume of 10.42 million shares in the last trading session.

VanEck Biotech ETF BBH

This fund, with net assets worth $7.29 billion, offers exposure to 151 large, mid, and small-cap biotech stocks. Its top three holdings include: AMGN (17.17%), GILD (17.13%) and VRTX (9.75%).

BBH has gained 13.5% over the past year. The fund charges 35 bps as fees. It traded at a volume of 0.003 million shares in the last trading session.

Global X Genomics & Biotechnology ETF GNOM

This fund, with net assets worth $47.4 million, offers exposure to 49 companies that potentially stand to benefit from further advances in the field of genomic science, such as companies involved in gene editing, genomic sequencing, genetic medicine/therapy, computational genomics, and biotechnology. Its top three holdings include: MRNA (8.84%), Praxis Precision Medicine (6.24%), and Arrowhead Pharmaceuticals (5.68%).

GNOM has rallied 22.1% over the past year. The fund charges 50 bps as fees. It traded at a volume of 0.005 million shares in the last trading session.

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Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report

Amgen Inc. (AMGN): Free Stock Analysis Report

Gilead Sciences, Inc. (GILD): Free Stock Analysis Report

Vertex Pharmaceuticals Incorporated (VRTX): Free Stock Analysis Report

Moderna, Inc. (MRNA): Free Stock Analysis Report

iShares Biotechnology ETF (IBB): ETF Research Reports

State Street SPDR S&P Biotech ETF (XBI): ETF Research Reports

VanEck Biotech ETF (BBH): ETF Research Reports

Global X Genomics & Biotechnology ETF (GNOM): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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