Pharmaceutical and defense industries are heavily investing in AI, yet concerns about overvaluation persist

Swiss drugmaker

(NOVN.S) has reached a deal to Inc for $12 billion, making it one of the most significant biotech acquisitions of the year. Announced on October 26, this move highlights Novartis's commitment to expanding into next-generation treatments and mirrors a wider industry pattern where companies use mergers and acquisitions (M&A) to speed up progress in artificial intelligence (AI) and data-driven drug research.

This strategy comes as fast-growing firms increasingly focus on embedding AI to stay ahead. According to a recent

, organizations with annual revenue growth of 10% or more tend to share several tactics: strong collaboration on AI projects, sophisticated systems for measuring AI impact, and predictive analytics to anticipate market trends. Interestingly, 33% of these high-growth companies use AI for competitive analysis, compared to just 20% across the broader market, pointing to a shift toward data-driven decision-making.

Novartis’s planned purchase of

, a company focused on gene therapies and protein design, is part of this movement. By bringing Avidity’s innovative technology in-house, hopes to accelerate the creation of treatments for neurological disorders and other challenging diseases. The transaction also reflects a growing industry reliance on AI-powered research and development, as pharmaceutical companies look to cut down on costly trial-and-error and speed up the path to new medicines.

Elsewhere, the defense and AI industries are experiencing their own wave of M&A activity. Palantir Technologies Inc (PLTR), a major player in AI-driven analytics, has seen its

in 2025, thanks to a series of major contracts with the U.S. Army, UK Ministry of Defence, and corporate clients like Boeing and Snowflake. Palantir’s revenue reached $1.03 billion in the second quarter of 2025, prompting management to raise its full-year forecast to $4.15 billion. Still, analysts are split: some hail Palantir as a top AI investment, while others argue its $400 billion valuation is excessive.

Smaller companies are also pursuing AI-fueled expansion. BigBear.ai Holdings (BBAI), which specializes in defense-related AI, has seen its

so far this year, drawing parallels with Palantir. Recent deals, such as a collaboration with Tsecond Inc to provide edge-AI solutions for the U.S. military and a facial recognition system at Chicago O'Hare Airport, have boosted investor optimism. However, BigBear’s Q2 2025 report showed an 18% drop in revenue and a net loss of $228.6 million, raising concerns about its long-term profitability.

The Forbes survey points to a major issue: while 62% of fast-growing firms expect strong returns from AI, adoption rates vary greatly by region and industry. North American companies lead in organization-wide AI use (69%), ahead of Europe, the Middle East, and Africa (49%), with the tech and automotive sectors showing the highest adoption rates (76% and 73%). This gap suggests that companies like Novartis and Palantir may face challenges replicating their AI strategies in markets or sectors where AI is less established.

Industry observers caution that high valuations carry significant risk. Palantir trades at about 100 times its projected sales, a ratio similar to established defense firms, despite annual revenue of just $4.15 billion. Likewise, BigBear’s stock, trading at 13 times forward sales, is considered by some to be overvalued given its financial performance. “Execution must match lofty expectations,” a Reuters report warned, noting that any setbacks in contract fulfillment or growth could lead to sharp declines.

As companies continue to chase AI-driven deals, maintaining a balance between innovation and reasonable valuations will be crucial. The Novartis-Avidity acquisition, Palantir’s defense contracts, and BigBear’s airport AI projects all showcase AI’s transformative promise—as well as the volatility that comes with betting on its future.

Novartis to acquire

for about $12 billion

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