Wall Street is mired in another panic over AI. And we contrarians are here for it.
Our play? As always, we’re going where first-level investors aren’t, quietly snapping up dividends AI is set to supercharge.
I’m talking specifically about an overlooked opportunity in drug stocks, which are about to see the value of their R&D dollars get a big boost from AI. We’re going to tap in with an 8.8%-yielding closed-end fund (CEF) that’s trading for 11.4% below its “true” value.
That discount exists in part because investors—worried about how AI may disrupt sectors like software—are ignoring pharma, and the accelerated product cycles (and cash flows!) AI is about to unleash here.
15 Years of Drug Research—Suddenly Sliced to Six
2026 is the first commercial year of “applied AI”—where AI moves past the hype stage and starts showing up in margins, product cycles and cash flows.
We’re already seeing the downdraft of that in software stocks, which have taken a beating as tools like Claude Code let more people make their own apps. The pullback has taken a chunk out of logistics companies and IT-security firms, too.
Pharma is the opposite of these. Because AI isn’t replacing drug companies and the scientists who work for them, it’s making these firms bigger, stronger and more profitable.
As you may already know, once a drug is developed, it moves through Phase I, II and III testing before being approved by the FDA. It can fail anytime in that process, sending researchers back to square 1—and wiping out every dollar spent on R&D to that point.
Enter AI, which can let scientists crank out new drugs faster and, most important, let these experimental treatments flunk out (if they’re going to!) in a cheap computer simulation, not halfway through a Phase III trial.
Historically, it has taken 10 to 15 years to develop a new drug. Every month matters because patents last only 20 years. The faster a company gets a drug to market, the more months and years it has to collect that competition-sheltered cash.
But with AI, some industry sources say this timeline could be squeezed down to just six years! But let’s be conservative: Even if AI cuts just two to four years off the process, that would still amount to a big sales boost for pharma companies.
The bottom line here is that in the years ahead, pharma stocks will have more shots on goal, resulting in more drug candidates and approved medications. And by getting these drugs to market faster, these companies will have more time to monetize the winners.
This, again, is the exact opposite of the software-stock panic. Which brings me back to that 11.4%-discounted CEF I mentioned off the top: the BlackRock Health Sciences Term Trust (BMEZ).
Let’s start with the dividend.
Right now, BMEZ offers up a sweet 8.8% payout. That’s one reason why we hold the fund in the portfolio of my Contrarian Income Report service. It’s returned a tidy 11% since we added it to our portfolio a little over a year ago, in December 2024.
That’s not bad for a sector that’s been under pressure, first over concerns about RFK Jr. leading HHS, then over tariffs and the administration’s efforts to control drug prices.
In light of that, the fund’s discount to net asset value (NAV, or the value of its underlying portfolio) has dropped from around 3% a year ago to 11.4% today.
That’s way overdone in light of the changes AI is making to pharma. Consider #2 holding Gilead Sciences (GILD).
Gilead focuses on oncology and HIV treatments. It’s a beast in pharma, with a loaded pipeline: 25 treatments in Phase 1 trials, 13 in Phase 2 and 15 in Phase 3. The company is teeing up lots of shots on goal, in other words.
Management knows what AI can do for it and is investing accordingly: Late last year, Gilead broke ground on a new 180,000-square-foot AI-enabled research center at its California HQ. The company is also building from a strong foundation on the financial front: Powered by growing revenue from its HIV and liver treatments, the stock has shot up 39% in the last year:
Gilead Rips—and That’s Before Its AI Edge Is Priced In
The company is already a heavy R&D spender—to the tune of $5.7 billion, or 19% of revenue, in 2025. And now along comes AI.
The tech will have the same magnifying effect on other drug majors in BMEZ’s portfolio, like Johnson & Johnson (JNJ) and Biogen (BIIB). We also like that BMEZ holds device makers like Medtronic (MDT) and Roche Holding AG, which makes both drugs and medical equipment.
These latter two companies are good “pick-and-shovel” plays on more R&D spending and rising health spending overall.
Which brings me back to that BMEZ discount. Rewind a year—before the tariff trauma and fears around RFK and drug prices—and this fund was trading at 3% below NAV.
As of this writing, as I mentioned a second ago, that discount has nearly quadrupled—to 11.4%, even though the future looks a lot brighter now than it did back then. That makes no sense, and it’s a disconnect we’re happy to exploit.
A Deep Discount With Momentum
What’s more, if you look at the bottom-right side of that chart, you can see that BMEZ’s discount looks like it’s scratching bottom and starting to move up.
That’s a great time to buy a CEF—when a discount is still wide but is steadily heading north. It’s an early indicator that a fund is starting to get attention.
If today’s discount shrinks to the 3% level it held a year ago—likely, in my view—we’re looking at just under 10% price upside from the closing discount alone. Add in that 8.8% dividend and you’re looking at around 18% in gains and dividends here. Pretty sweet.
So while Wall Street wrings its hands, trying to figure out which sector AI will hit next, let’s go the other way and snap up AI winners, like the unloved (for now) stocks in BMEZ’s portfolio.
Start With BMEZ—Then Grab a Whole Portfolio of 9% Monthly Payers
High dividends like BMEZ’s 8.8% are key to keeping ahead of inflation and achieving the retirement “holy grail”: retiring on dividends alone.
Even better if they roll in monthly, as BMEZ’s payout does.
Now we’re going to build on this overlooked AI winner with my “9% Monthly Payer Portfolio.” As the name says, this collection of stocks and funds gives you a 9% dividend, paid monthly (of course) and backed up by stocks and funds from across the economy.
And thanks to these assets’ deep discounts, we’ve got plenty of upside to enjoy here, too.
The time to buy these rich monthly payers is now. Click here and I’ll walk you through them and give you a free Special Report revealing their names and tickers.