Artificial intelligence (AI) has emerged as a revolutionary force in healthcare, particularly in diagnostics and drug discovery. By leveraging vast biomedical datasets, machine learning, deep learning, and natural language processing, AI-driven tools enhance accuracy, speed, and efficiency in disease detection and therapeutic development. This article reviews the principles of AI in diagnostics and drug discovery, highlights key applications, explores challenges, and discusses future prospects. Tables summarize prominent AI techniques, their applications, and real-world examples, demonstrating how AI is reshaping the landscape of precision medicine and pharmaceutical innovation.