A $50 million private investment from the AI-linked chipmaker sparked a surge in Recursion, which uses machine learning to discover new medicines. The stock more than doubled at the market open before ending Wednesday with a record 78% gain.

The rally is a sign the AI mania may finally be moving to the battered biotechnology sector which has suffered under the Federal Reserve’s interest rate hiking regime. Before Wednesday’s surge Recursion had slumped 12% year to date, shares are now up 57%.

The new funds cement Recursion’s leading position as the pre-eminent AI-driven biotech firm, according to Gil Blum an analyst with Needham & Co. “The collaboration will provide Recursion access to the most powerful AI computing company on earth,” he wrote in a note to clients.

Keybanc Capital Markets analyst Scott Schoenhaus called the pact “a meaningful validation step for the AI to drug/molecule development space in general.” 

Peers using algorithms to find novel targets also gained. Exscientia Plc and AbCellera Biologics Inc. both jumped 12%, Relay Therapeutics Inc. climbed 7.1% while Schrodinger Inc. rose 3.6%.

Baillie Gifford & Co., a money manager known for early bets on stocks like Tesla Inc. and Moderna Inc., is Recursion’s largest holder, according to data compiled by Bloomberg. Rival Cathie Wood’s ARK Investment Management also owns a stake.

Recursion has also garnered interest among short sellers this year. Short interest as a percentage of float, or how many shares have been borrowed by traders to bet against, has risen to nearly 19% from about 14% in January, according to data from S3 Partners. 

–With assistance from Jameelah Robinson and Carmen Reinicke.