We recently published a list of Top 10 Trending AI Stocks on Latest Analyst Ratings and News. Since Tempus AI Inc (NASDAQ:TEM) ranks 10th on the list, it deserves a deeper look.
AI stocks have pulled back considerably over the past few weeks and analysts believe this is exactly the healthy correction long-term investors were looking for. According to Bloomberg, Rob Sluymer, technical strategist at RBC Wealth Management, said that AI stocks have stabilized at levels they can sustain for the rest of the year. The analyst said technical indicators now show AI stocks have gone from overbought to oversold territory.
“Now that positions have been unwound, there’s an opportunity for traders to take positions,” Sluymer reportedly said.
Many others agree with Sluymer. Dan Ives of Wedbush reiterated his view that we are still in the early stages of the AI bull market in a latest program on CNBC.
“If you look at what we’ve seen from AI revolution to broader tech, it’s been strong from an earnings perspective. And the growth scare that we saw, it’s just a bump in the road to what I believe is the fourth industrial revolution playing out,” Ives said.
For this article, we picked up 10 AI stocks that are making waves on the back of latest earnings, analyst ratings or important industry news. With each company, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Tempus AI Inc (NASDAQ:TEM)
Number of Hedge Fund Investors: 18
Tempus AI Inc (NASDAQ:TEM) is a small-cap AI healthcare tech stock making waves these days. The stock is up about 26% so far this year. Piper Sandler recently started covering the stock with a Neutral rating, citing valuation concerns. The firm acknowledged the company’s strong position in tech and pharma services but said it’s reluctant to assign a higher industry multiple until it sees more robust revenue growth.
Tempus AI Inc (NASDAQ:TEM) is working in the diagnostics and testing industry, including next-gen sequencing and molecular profiling, for healthcare providers and researchers. The company also offers a data library and tools for pharmaceutical companies to analyze clinical and molecular data.
Tempus AI Inc (NASDAQ:TEM) platform has 200 petabytes of data, serving over 95% of top pharmaceutical companies and more than 7,000 doctors. All of this data is used in AI-based sequencing and diagnostics.
In 2023, Tempus AI Inc (NASDAQ:TEM) saw revenue growth of 66% but the growth slowed to 47% in the last quarter of 2023, and in the first quarter of 2024, sales only grew by 26% to $146 million, with operating losses holding steady at $53 million. This slowdown in growth and ongoing losses are concerning amid a high P/S ratio and high cash burn rate. Tempus AI Inc (NASDAQ:TEM) ability to stay competitive could be at risk, especially since their tests, which cost about $1,500 each, need to be highly accurate to avoid serious consequences.
Baron Health Care Fund stated the following regarding Tempus AI, Inc (NASDAQ:TEM) in its Q2 2024 investor letter:
“We initiated a small position in Tempus AI, Inc (NASDAQ:TEM), an intelligent diagnostics and health care data company. Tempus has two synergistic business units: Genomics and Data & Other. Within the Genomics business, Tempus provides diagnostic tests, particularly for cancer treatment selection. Tempus’ labs sequence the tumor’s genome and transcriptome (gene expression) and can help oncologists select the best treatment for their patient. We think the cancer treatment selection sequencing market is underpenetrated and poised to continue to grow rapidly, and Tempus is well positioned as one of the leaders in this field. The genomics testing data also feeds into Tempus’ value as a data company. Tempus has amassed a huge (over 200 petabytes) proprietary multimodal dataset that combines clinical patient data (which includes clinical records, imaging data, etc., mostly from two-way collaborations with health systems) with genomic testing data from the Genomics business. In total, the company’s dataset includes approximately 7.7 million clinical records, over 1 million imaging records, over 910,000 matched clinical and molecular dataset profiles, and over 970,000 samples sequenced. In addition to using this data to empower more intelligent diagnostics, Tempus also licenses this data to biopharmaceutical companies who use it to design smarter clinical trials and identify potential new drug targets. Tempus works with 19 of the top 20 pharmaceutical companies in this capacity and has disclosed 9-figure deals with 3 biopharmaceutical companies. We think this proprietary dataset is unique with meaningful barriers to entry, and brings meaningful value to biopharmaceutical R&D.”
Overall, Tempus AI Inc (NASDAQ:TEM) ranks 10th on Insider Monkey’s list titled Top 10 Trending AI Stocks on Latest Analyst Ratings and News. While we acknowledge the potential of Tempus AI Inc (NASDAQ:TEM), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TEM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.