Here's Why Inspire Medical Systems (INSP) Retreated in Q2

Baron Funds, an investment management company, released its “Baron Discovery Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund was up 14.76% (Institutional Shares), outperforming the 11.97% return for the Russell 2000 Growth Index. The fund was up 7.68% year-to-date, well ahead of the Index’s -0.48% return.  In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Baron Discovery Fund highlighted stocks such as Inspire Medical Systems, Inc. (NYSE:INSP). Inspire Medical Systems, Inc. (NYSE:INSP) is a medical technology company, focuses on the development and commercialization of minimally invasive solutions for patients with obstructive sleep apnea.  The one-month return of Inspire Medical Systems, Inc. (NYSE:INSP) was 2.12%, and its shares lost 9.58% of their value over the last 52 weeks.  On July 30, 2025, Inspire Medical Systems, Inc. (NYSE:INSP) stock closed at $131.21 per share, with a market capitalization of $3.87 billion.

Baron Discovery Fund stated the following regarding Inspire Medical Systems, Inc. (NYSE:INSP) in its second quarter 2025 investor letter:

"Inspire Medical Systems, Inc. (NYSE:INSP) is a medical device company offering a treatment option called hypoglossal nerve stimulation for patients with moderate-to-severe obstructive sleep apnea. Shares declined during the second quarter. The company is in the early stages of commercializing its fifth-generation device, Inspire 5, which reduces procedure time and simplifies the process for surgeons. Management noted that some patients delayed surgery in anticipation of the new device, leading to a slowdown in procedures during the quarter. Shares were also pressured by concerns about new competitors entering the market and the potential long-term impact of GLP-1 weight loss drugs on business, given the link between obesity and sleep apnea. Despite these headwinds, we believe Inspire remains well positioned to grow at a healthy rate, supported by its market leadership and the substantial size of the addressable patient population. We believe the current valuation presents a compelling entry point given the company’s long-term growth potential."

Inspire Medical Systems, Inc. (NYSE:INSP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held Inspire Medical Systems, Inc. (NYSE:INSP) at the end of the first quarter, which was 32 in the previous quarter. Inspire Medical Systems, Inc. (NYSE:INSP) generated revenue of $201.3 million in the first quarter of 2025, representing a 23% increase compared to the first quarter of 2024. While we acknowledge the potential of Inspire Medical Systems, Inc. (NYSE:INSP) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Inspire Medical Systems, Inc. (NYSE:INSP) and shared the list of best medical technology stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.