Biotech Is Popping. No One Seems to Care. 

If a sector rallies in a forest and no one’s there to hear it, does it really cash in? 

Moderna turned investors’ heads a few weeks ago after announcing positive results in a late-stage trial for an mRNA melanoma vaccine, with the company’s stock jumping a whopping 177% the day of the announcement. The news captured headlines, but a broader biotech rally has been brewing in the background — driven by accelerating consolidation, progress in cancer drug development and artificial intelligence — powering biotech funds to levels not seen since the Covid era. Still, fund flows have been slow to catch up, meaning it could be an area of increased interest from advisors. 

Healthcare flows are “pretty unimpressive,” said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. For example, the iShares Biotechnology ETF brought in $361 million in 2026, according to Bloomberg data, compared with $1.47 billion from just April to July of 2020, even though the fund’s price is now higher than it was then. “That said, you had three straight years of outflows in healthcare … So you do have a little bit of money coming back into healthcare after it’s been so beaten up.” 

Room to Run

Biotech funds had a rough few years after Covid-19. At the bottom of the selloff, “well over 30% of the biotech market were trading below the value of cash on their balance sheet,” said Yuri Khodjamirian, CIO at Tema ETFs. With the tailwinds the industry is now experiencing, that sets it up for a sustained rally. “Historically, when you had rallies in the biotech index, it hasn’t just stopped with one year or two years. It kind of keeps going, particularly because the valuations are quite attractive and there’s no exuberance in terms of positioning.” 

The two largest biotech funds have outperformed the S&P by a fair margin so far this year: 

• The SPDR S&P Biotech ETF (XBI), with $11.4 billion under management, has climbed more than 33%, according to ETF.com. 
•  The iShares Biotechnology ETF (IBB), with about $10.5 billion in AUM, has gained almost 24%.

The Tortoise in the AI Race: Healthcare is a defensive sector, and one that many investors have been turning to in order to diversify against technology. But advances in artificial intelligence are poised to benefit the sector. “There is a tendency to confuse potential future returns from direct investment in AI tech stocks with the actual value of AI technology to its beneficiaries,” said Karen Andersen, head of Morningstar’s healthcare sector team. “AI beneficiaries like the pharma industry can still have strong long-term benefits from this technology … We’re still just at the beginning of a longer timeline for seeing actual financial benefits from applying AI to drug development.”