Safe Haven Amid AI Crash! Major Pharmaceutical Stocks Approach Historic Highs
Amid concerns over AI capital expenditures, funds are seeking a "certainty premium." State Street Healthcare ETF reached a record high. Eli Lilly and AbbVie are both approaching their historical highest closing prices, while Gilead and Amgen have surged 7.7% and 7.2% respectively over the past five days. Eli Lilly continues to bet on the future through its GLP-1 dominance and 40 M&A deals totaling $20 billion. AbbVie's core drug Skyrizi has shown positive data for its new subcutaneous formulation, which is expected to extend its patent and drive additional sales.
As technology stocks face sell-offs, funds are accelerating their flow into large-cap pharmaceutical sectors. Biopharma giants such as AbbVie and Eli Lilly have seen their share prices approach historic highs this week, reflecting a clear signal that investors are shifting toward defensive assets amid volatility in AI-related stocks.
On Thursday, the State Street Health Care Select Sector SPDR ETF hit an all-time high of $177.19, rising 5.6% over the past five trading days. At the same time, investors are also pouring into consumer staples and U.S. Treasuries, triggered by a collective decline in AI-related stocks—as concerns mount over the scale of AI capital expenditures and a slowdown in Anthropic's revenue growth.
Eli Lilly shares closed up 3.4% on Thursday, marking their third-highest close in history; AbbVie finished at $283.40, the second highest in history after just hitting a record $283.48 the previous day. Neither company was driven by major clinical data releases or M&A news; they have purely benefited from defensive sector rotation. Over the past five trading days, Gilead Sciences and Amgen rose 7.7% and 7.2%, respectively, Merck gained 2.3%, and UnitedHealth Group surged 9.1% on strong Q3 earnings.
Sector Rotation: As AI Retreats, Pharma Takes the Stage
According to MarketWatch, the high volatility in AI stocks is driving capital to reassess the allocation value of large-cap pharma. The core appeal of these companies lies in their stable and predictable earnings growth—steady investment in R&D pipelines and extending the lifecycle of core drug patents, offering a risk-return profile markedly different from tech stocks.
As AI stocks come under pressure from debates over capital spending and lowered growth forecasts, investors are simultaneously shifting toward consumer staples and government bonds, with the defensive attributes of the pharma sector coming to the fore. The State Street Health Care ETF hitting all-time highs is a direct reflection of this reallocation of capital.
Eli Lilly is one of the core leaders of this pharma rally. With its dominant position in the GLP-1 weight loss drug market, Eli Lilly has become one of the industry's most recognized success stories. Notably, this week's share price increase was not driven by specific catalysts but displayed a pattern—whenever AI stocks face headwinds or major sector milestones occur, Eli Lilly shares tend to rise.
Even after its breakthrough success in GLP-1, Eli Lilly continues to pursue an aggressive forward-looking strategy. According to CEO Dave Ricks, the company completed 40 deals this year totaling $20 billion, and two new weight loss drugs are nearing regulatory approval. This strategic resolve to "continue betting on the future after success" has further strengthened market confidence in its long-term growth.
AbbVie's strong performance, on the other hand, is bolstered by more concrete fundamentals. Latest data on the subcutaneous formulation of its core drug Skyrizi shows confirmed efficacy in Crohn’s disease patients after 24 weeks of treatment, laying the groundwork for FDA approval in the US and potentially extending the drug’s patent protection period.
According to AbbVie executives, the subcutaneous formulation is expected to deliver "substantial" additional sales. Compared with current clinic-based injections, the subcutaneous version allows patients to self-administer at home, significantly enhancing medication convenience. Skyrizi reported $17.6 billion in sales last year, widely used among patients with inflammatory bowel disease, Crohn’s disease, and other autoimmune disorders.
Developing subcutaneous versions of core medications has become a critical strategy for biopharma companies to extend patent lifecycles, and AbbVie's move has clear business logic.
However, it is worth noting that the strength in large-cap pharma does not mean the entire healthcare sector is booming. The high-risk, high-reward biotech segment is experiencing obvious divergence. The State Street SPDR S&P Biotech ETF has fallen 2.8% in the past month, following a much-anticipated recovery earlier this year.
The performance of the biotech sector is highly correlated with interest rate trends and financing conditions, forming a stark contrast with the resilience of large diversified pharmaceutical companies. In the current market climate, investor preference is shifting toward the latter—certainty premiums are fast becoming the core logic behind this pharma rally.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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