Why Medical Device Giant Intuitive Surgical Deserves Your Attention — Despite Recent Headwinds

When heavyweight investors like Izzy Englander’s Millennium Management and Cathie Wood’s Ark Invest both hold the same stock, it’s worth taking notice. Intuitive Surgical (NASDAQ: ISRG) is precisely such a case, signaling strong conviction from two of Wall Street’s most influential voices. But what makes these seasoned investors bullish on a company facing mounting competitive threats?

The Challenges Are Real — But Manageable

Let’s start with the legitimate concerns. Intuitive Surgical, the pioneer behind the da Vinci robotic-assisted surgery system, is entering an era of intensified competition. For nearly two decades, the company enjoyed near-monopoly status in the robotic surgery space. That’s changing rapidly.

Medtronic’s Hugo system is poised to disrupt the market in urologic procedures, with strong clinical trial data supporting its imminent U.S. approval. Additionally, Johnson & Johnson is developing its Ottava platform, which could launch within years. This competitive pressure is undeniably a headwind.

Beyond competition, tariff exposure presents another challenge. Since Intuitive Surgical conducts substantial manufacturing internationally, rising import duties have already impacted margins. If tariff regimes persist, the damage could deepen.

Then there’s the valuation question. At 48 times forward earnings — compared to the healthcare sector average of 17.4x — the stock isn’t cheap. It’s trading at a significant premium, which has contributed to underperformance relative to the broader market this year.

The Moat Is Wider Than It Appears

Here’s what many investors miss: Intuitive Surgical isn’t primarily a device manufacturer. It’s a recurring revenue engine.

While selling da Vinci systems builds the installed base, the real profit driver comes from the instruments and accessories used in thousands of procedures. These consumables have shorter lifespans and must be continuously replenished, creating predictable, recurring cash flows that typically carry higher margins than the hardware itself.

This is the competitive advantage that justifies why Izzy Englander and other institutional managers maintain conviction. As the installed base expands, instrument revenue compounds, naturally improving operating margins over time.

Massive Runway for Growth

The addressable market remains largely untapped. As Medtronic itself acknowledged, less than 5% of eligible surgical procedures were performed robotically. That gap represents enormous whitespace.

Consider the structural tailwinds: global aging populations will drive surging demand for surgical interventions. Robotic-assisted minimally invasive procedures offer clear clinical superiority — reduced bleeding, smaller scars, faster recovery — compared to open surgery. These advantages ensure sustained adoption, even amid competitive pressures.

Navigating the Risk Factors

On tariffs: numerous corporations have successfully negotiated exemptions, raised prices to offset duties, or reallocated manufacturing. Intuitive Surgical possesses the scale and strategic leverage to pursue similar mitigation strategies.

On valuation: historically, Intuitive Surgical has commanded premium multiples. The company consistently outpaces medical device peers in revenue growth, maintains profitability, leads a high-growth industry, and benefits from structural competitive advantages including customer switching costs. Long-term holders typically find valuation concerns dissolve over time horizons exceeding a decade.

The Bottom Line

Cathie Wood and investors like Izzy Englander aren’t betting on near-term price appreciation amid current headwinds. They’re positioning for a decade-plus of compound growth driven by recurring consumables revenue, an expanding installed base, and a surgical market poised for roboticization. For patient capital, Intuitive Surgical represents precisely the type of quality business worth owning through inevitable cycles.