UnitedHealth Group Inc. (UnitedHealth (UNH)) is quietly turning into one of the more interesting AI stories in healthcare — at least according to Morgan Stanley.

In a note published Thursday, analyst Erin Wright named UnitedHealth the firm's top pick in managed care, raised the price target to $453 from $395, and kept an Overweight rating. The thesis? AI is starting to pay real dividends, and UnitedHealth is leading the charge.

Wright pointed to two big themes shaping the managed care landscape right now. First, utilization trends are softening, which has helped stocks in the sector move higher. Second — and this is the bigger story — AI adoption is creating genuine opportunities to boost revenue and cut costs. Morgan Stanley estimates that as AI efficiencies scale, the average managed care company could see roughly 45% upside to earnings per share.

That's not just theoretical. The firm says AI has moved well beyond pilot programs and is now embedded in core functions across the healthcare ecosystem. Think about it: healthcare runs on massive amounts of sensitive data and still relies heavily on manual, labor-intensive processes. That's exactly the kind of environment where AI can make a big dent.

Morgan Stanley believes AI can do more than just reduce operating expenses. It could also improve medical loss ratios — the percentage of premiums spent on claims — and create new revenue streams through AI-powered products and services. UnitedHealth, the firm notes, has been one of the industry's most vocal advocates for AI deployment.

Now, a word of caution: not all the savings will flow straight to the bottom line. Companies may choose to reinvest those gains. Morgan Stanley specifically called out UnitedHealth and CVS Health Corp. (CVS (CVS)) as examples of organizations currently plowing savings back into their businesses.

The firm's analysis focused only on insurers' insurance operations, which it described as a conservative approach. Additional upside could come from other segments, including pharmacy benefit management and specialty pharmacy operations.

On UnitedHealth specifically, Morgan Stanley said the company has strengthened its operational footing and is well-positioned to adapt its Medicare Advantage business if needed to support profitability. The ongoing restructuring at Optum Health is also starting to show results in 2026. With much of that work already underway, the firm believes execution is now the main driver of further margin recovery.

As of Friday's publication, UnitedHealth shares were up 0.46% at $398.30, trading near their 52-week high of $404.15.