Charles Nahabedian is hardly on an island when he professes his firm belief that artificial intelligence (AI) is going to dramatically change and improve healthcare. Where he is a bit of an outlier, however, is when he stated that the technology is not ready for such high praise and that significant work is still needed to confirm its true effectiveness for medtech from both a clinical and business perspective.
“AI is still in the early stages, and while at this time it has made useful suggestions, its output has had errors in general,” said Nahabedian, CEO and co-founder at
VK Digital Health,
a technology company based in Bethesda, MD, that develops tele-diagnostic platforms for remote healthcare management. “In the near term, I think AI will help in the more rudimentary analyses, alternatives, and recommendations. It is going to be more successful sooner in those areas that don't impinge upon a physician's decision-making process. And it will take an astute businessperson to decipher AI output, including decisions and recommendations.”
His thoughts on the potential of AI and where it might lead are indicative of what appears to be a compelling year on the horizon for the industry and original equipment manufacturers (OEMs), as advancing technology is expected to have a significant impact on what is being widely forecasted to be a time of robust medtech growth, increased revenues, and a viable investment market.
According to various experts in the field who recently spoke with
MD+DI
, expectations for 2026 include a more strategic pathway to M&A activity, more companies entering into IPOs, and a focus on the development of more data-enabled and AI-enabled diagnostic devices. In the end, it very well may be those organizations that succeed in the advancement of AI that see the most success as these types of technologies become more lucrative with more reliability.
“We are seeing a full-throttle approach from the market in the race to integrate AI into their businesses,” said Maria Palombini, the healthcare and life sciences global practice lead at IEEE Standards Organization, a non-profit organization that assists industry stakeholders in establishing global technology standards. “And there are different reasons behind that. Many publicly listed companies do it to show that they’re achieving innovation. Others are doing it because there is an opportunity to elevate the offerings among their products and services. These are all valid approaches and reasons, but the reality is that it's still really early for AI. Just because we have a market hype wave running towards it, we haven't been able to validate the results yet.”
Advancing towards more appropriate AI
From a high-level view, medtech is positioned to be a “success story,” with industry revenue growth estimated to be 6% to 7% for 2025 after recording an annual tally of $584 billion in 2024, according to a recently released
Pulse of the Industry Report
produced by
Ernst & Young (EY) LLP, a global organization that provides consulting and other services.
Still, the medtech industry, like many others, presents a complex picture to assess due in part to such external influences as global tariffs and supply chain management, said John Babitt, global medtech leader at EY and one of the study’s authors.
“This year has been a year of some uncertainty with respect to tariffs and the supply chain in general,” he said. “There was a lot of turbulence early on, but it seems like companies have really figured out how to navigate.”
The integration of AI has been key to that, both from a “front office” perspective for client-facing purposes and from “back office” management of operations and internal support functions, said Babitt.
“Companies are approaching things a little bit differently depending on their own situations, but one of the things that we’ve highlighted in our report is that there’s a real multifunctional approach to dealing with tariffs,” he said. “Companies are not just viewing this as a ‘tax issue.’ They’re looking at contracting, they’re looking at pricing, they’re looking at how they organize their supply chain. And they’re using AI and technology to better align demand with their internal supply.”
On the front office, side, AI is being incorporated in a multitude of areas — namely in radiology, where most of the approvals from FDA have been granted, according to Babitt.
“This field has experienced a lot of growth in AI, particularly in reading scans, interpreting scans, being able to provide more feedback to clinicians, and improving workflow within the hospital,” he explained. “But we’re also seeing AI having a role in areas like spine and/or cardiac that are really trying to create a more holistic ecosystem with their AI. I think we'll continue to see this evolution as well.”
John C. Riddle, managing director at Brown Gibbons Lang & Company, an independent investment bank and financial advisory firm, said the ubiquitous nature of AI has already placed an emphasis on the need to focus development efforts on technology that introduces something truly innovative to differentiate from the crowd and advance business stature. “AI is already everywhere, and anybody that's not thinking about it relative to their business and business model needs to start to incorporate that into the strategy,” he said. “If you've got a solution that is AI-enabled, it is addressing a market, and you're going to change the paradigm — there’s capital available to that at relatively high values, generally speaking.”
At VK Digital Health, an organization that operates as a Software as a Service (SaaS), AI has become integrated with the intention of augmenting what the medical team and patients need to know as opposed to attempting to replace the physician altogether. Nahabedian said there are plans to investigate the utilization of generative AI to be added to the SaaS, but any potential enhancements will be carefully and comprehensively vetted. “
The other place AI might be helpful is in the area of collecting data from the patient to more quickly reach conclusions as to certain vital signs or other measurements of health,” Nahabedian said.
“There's potential there, but vendors are going to have to initially use output as advice to the doctor. AI can better examine results, compare them with historical standards, and illuminate the information that it finds for the physician. And I think you'll see a lot more of that.”
Nahabedian advises that industry professionals exercise caution when considering the use of AI for marketing and other business-related communications.
“We have found that AI has errors, and if you're not an effective editor for accuracy, the recipient is going to see errors and assume that the organization doesn't understand them, that the content is clearly created by a machine, and that it has no value.”
The most influential benchmarks as more applications and devices delve into AI will likely be validation of results and responsible integration, said Palombini.
“Being able to validate results is currently a challenge for everybody,” she said. “That doesn’t mean that what is being done today is wrong, it’s just the nature of dealing with a new technology being inserted into our system.”
As integrated planning in general becomes more common throughout the industry, medtechs can expect to see an enhanced capability to predict demand, inventory, and capacity needs en route to better managing materials, vendor networks, distribution planning, and production and operational scheduling, according to the EY report.
Across the industry, leading companies are increasingly developing differentiated, innovation-led models that help move to a higher-growth trajectory relative to their peers, the report claims, while suggesting that improved data and AI tools to optimize supply chains and operations more broadly will be a key differentiator.
Strategic approaches to M&A activity
With mergers and acquisitions (M&A) costing a reported total of $38.8 billion for 2025, the rate of M&A activity remains below historical averages, according to the EY report.
However, an 11% increase has occurred in the average size of these deals, which at $497 million, also stands as a 72% increase in the average rate of transaction. These figures are part of signaling an agenda to be more strategic about committing to M&A investments as opposed to reacting to general market trends, said Riddle.
“It’s less driven by market conditions versus the land of the old-school strategic M&A — meaning that a transaction is going to happen if there is a strategic fit,” he said. “It’s not just about being in a hot market where anything sells. For traditional instrument reagent models that are focused on a given disease state, getting to a transaction at the right value needs to fit a given larger global strategic strategy. They have to want to be in that disease state and have the capability. There’s a great amount of interest with OEMs and solutions providers who are focused on oncology, diagnostics, and digital and AI. Decidedly more investment and higher relative multiples are being assigned in that space. But there are other areas where it’s selective and driven by strategic imperative versus just playing the growth trend in a space.”
At
Gentell Inc.,
a global, vertically-integrated medical company based in Yardley, PA, that specializes in advanced wound care products and services, David Navazio, president and chief executive officer, says that he is fielding inquires related to M&A at a higher rate recently than he has compared to the last few years in the wound care sector, which he attributes to a track record of sustainability that carries a lot of weight in the present given ongoing global economic uncertainty.
“We are seeing a lot of interest in companies that are already existing, and not so much in startups,” said Navazio, who launched his organization in 1994 and has grown it into what he and his stakeholders define as one of the largest vertically integrated wound care companies in the world, with five manufacturing plants on four continents. “The real money, the private equity money, the investment funds, and the IPOs — they're going to established companies with a good track record. And they're bidding them up.”
Still, the industry overall has experienced a
surge in venture capital financing.
Another important aspect to M&A interest today is scalability, said Navazio, with which he sees a direct correlation to successful and verifiable integration of AI.
“When we look at scalability, there has to be an ability to grow outside the reach of medical professionals,” he said. “You need to make sure that you have a program that can get patients treated wherever they are, whenever they are. And that’s where AI and a lot of your technology comes in. A component of the company needs to be able to take the evidence-based data and have a way of making business decisions — as long as it's verifiable and evidence-based.”
New Influx of IPOs
The unofficial drought of IPOs in medtech can be deemed over, explained Babitt. “Over the last year, we’ve had approximately a half-dozen medtech IPOs after not having any in the last approximately three years. There was a lot of pent-up demand. There are a multitude of companies that are now either at that ‘magic number’ of $40 million or $50 million of revenue run rate or well in excess of that rate. I've never seen as many $100 million rounds of financing as what we have seen this year. And to that extent, now we’re even seeing $200 million rounds. I would expect to see a robust set of companies that will either try the IPO route or run a dual-process route.”
As evidence of this, Babitt points to a
$250 million raise
by HistoSonics, Plymouth, MN, in the fall that followed an acquisition completed a few months prior, as well as Boston Scientific’s
acquisition
of Nalu Medical, Carlsbad, CA, in October. “When companies are raising this kind of capital, it does ultimately set a precedent to get to an IPO sooner rather than later,” said Babitt. “I think we’ll see continued access to the public markets as long as the window stays open, which, hopefully, the solving of the government shutdown and the Securities and Exchange Commission back at work will put things on trajectory. Because the first quarter of the year is usually an opportune time from an IPO perspective. We certainly expect quite a few companies to look at the public markets if they can get their documents reviewed by then. I would expect to see a robust set of companies either try the IPO route or run a dual-process route.”
David Hochman, CEO at
Orchestra BioMed,
New Hope, PA, a device technology company that specializes in late-stage clinical development for conditions including hypertension and artery disease, believes the upcoming year will be marked by IPO action.
“I think 2026 has the potential to be a strong year in the public capital markets for medtech and medical devices, both in terms of appreciation of value for large and mid-cap, as well as for small-cap,” he said. “Predominantly, companies that have waited a long time have had to secure additional private investment to become that target profile that is so typical. When you’re a mature, approved, commercial-stage company that’s generating and growing revenues with attractive products — that’s difficult to do. We haven't really seen the markets open consistently, even for those companies. But I'm optimistic that in 2026, that should happen. What’s so interesting is that so much of the smaller companies that can get public and can raise capital in the public capital markets, by contrast, are truly development-stage companies that are developing products in the clinic or even earlier. And that's always the interesting contrast between the device industry and the public capital market and the biopharm industry.”
Tariffs & trade
The intricacies of global trade policy have become an area where any organization across the medtech spectrum has had to rapidly broaden its education to appropriately understand how all products could be impacted by tariffs, when this is traditionally not a required domain of technical expertise, according to EY’s analysis. Many companies are reportedly exploring the potential of creating “cross-functional tariff task force” groups and governance strategies
to evaluate the impact of current and potential tariffs through scenario analysis, identifying mitigation plans, and benchmarking against competitor activity. These specialized task forces could also help to identify tariff mitigation actions across the supply chain, tax and trade, and commercial and government affairs to assist companies in prioritizing by impact and speed to value. “As we exit the year, companies feel a lot more confident that they at least have a plan for dealing with tariffs,” Babitt said.