Ken Griffin’s Citadel Advisors is rotating away from high-flying artificial intelligence champions and making a sharp contrarian bet on Intuitive Surgical Inc. (ISRG), plowing capital into the beaten-down surgical robotics leader during the first quarter even as the company navigates competitive and profitability headwinds. The move from one of Wall Street’s most respected investors — whose track record of consistent superior returns makes every portfolio shift closely scrutinized — offers a fresh signal of how top money managers are positioning amid lofty AI stock valuations.
Recent regulatory disclosures show the hedge fund sold 2.9 million shares of Nvidia Corp. and offloaded 6 million shares of Amazon.com Inc. in the period. Both tech giants remain among Citadel’s largest holdings, framing the reductions as a tactical reallocation rather than a full retreat from the AI trade, with capital redirected to opportunities seen as having more attractive risk-reward profiles. Intuitive Surgical stands as the most high-profile target: Citadel lifted its stake in the medical device maker by 30.3% in the quarter.
Intuitive Surgical, the undisputed leader in robotic-assisted surgery, has seen its stock fall 20% over the past 12 months, underperforming the broader market despite largely solid operating results. Three key overhangs have weighed on investor sentiment.
First, competitive dynamics are shifting after years of near-monopoly power. Medtronic secured approval for its competing Hugo surgical system last year, while Johnson & Johnson is advancing its Ottava device toward regulatory clearance, bringing new rivals to a market long dominated by Intuitive’s da Vinci platform.
Second, newer generation systems — including the flagship da Vinci 5 — carry lower profit margins than the company’s historical average, creating a near-term drag on earnings as sales of the models ramp up. Third, steep tariffs have squeezed the company’s financial performance.
For Citadel, the selloff looks overdone. The firm’s wager is rooted in the view that none of Intuitive’s current challenges are existential, and its long-term growth outlook remains strong at the depressed share price.
Twenty-six years since the first da Vinci system launched, Intuitive has built a commanding lead that will be hard for newcomers to erode. Its vast installed base, decades of real-world procedure data, and track record of improved patient outcomes create steep barriers to entry, while high switching costs for hospitals and trained surgeons form a wide economic moat. The global robotic surgery market also still holds massive untapped penetration potential. The company is also actively developing AI applications to upgrade its technology, a move that could further entrench its leadership over time.
The margin pressure from new systems, meanwhile, is widely expected to be temporary. Lower-margin hardware sales lay the groundwork for a larger fleet of devices, which in turn drives steady, higher-margin recurring revenue from disposable instruments, accessories and ongoing service contracts. That recurring revenue stream scales up as the installed base grows, ultimately lifting overall profitability.
On tariffs, Intuitive has room to gradually pass along modest price increases to its large installed customer base, with minimal risk of customer attrition given the scarcity of comparable alternatives on the market.
Intuitive Surgical’s 2025 results underscore the durability of its model. Total revenue reached $10.1 billion for the year, split across three segments: $6.0 billion from instruments and accessories, $2.5 billion from system sales, and $1.6 billion from services. Recurring revenue from instruments, accessories and services combined makes up more than 70% of total sales.
By the end of 2025, the company had deployed more than 11,100 da Vinci systems globally. Annual procedure volume rose 18% to exceed 3.1 million, pushing cumulative all-time procedures past the 20 million mark.
Skeptics note the stock still looks pricey on paper, trading at 39.7 times forward earnings — more than double the 17.4 average for the broader healthcare sector. But bulls counter that the premium is warranted by Intuitive’s far faster growth rate, dominant market position and large long-term addressable market. For Griffin’s team, the 20% pullback has created a buying opportunity in a high-quality franchise — a classic move from an investor famed for spotting value amid market pessimism.
