As 2024 approaches, conversations surrounding investment opportunities increasingly centre on artificial intelligence (AI) and its transformative potential across various sectors. Amid this discussion, an interesting stock has emerged as a potential contender for savvy investors' portfolios: Tempus AI (NASDAQ: TEM). This health technology company, which has recently seen a significant drop in its share price—down 50% since mid-November—is capturing attention for its burgeoning role in advancing oncology through AI and data analytics.
Tempus has positioned itself as an industry leader, boasting the world's largest library of clinical and genomic data with over 6 million patient records. The firm is focused on utilising AI to enhance precision medicine in cancer care, enabling healthcare providers to leverage comprehensive data in tailoring patient treatment and accelerating drug development. Its mission statement emphasises the need for timely and accurate patient care, declaring that it aims "to help make sure patients are on the right drug at the right time."
Scottish Mortgage Investment Trust has expressed a strong belief in Tempus's potential. The portfolio director lauded the company’s unique positioning at the nexus of genomic profiling and AI-enhanced health data, indicating a confidence in its capacity for substantial long-term returns.
Financially, the company is experiencing robust growth. In the third quarter of 2023, Tempus reported a year-on-year revenue increase of 33%, reaching $181 million. For the entire year, estimates suggest revenue will be approximately $700 million, reflecting 32% growth. CEO Eric Lefkofsky noted the company's overall performance is indicative of strong momentum, particularly in its genomics and data services sectors.
Despite the positive financial trajectory, Tempus is not yet profitable and reported a net loss of $75.8 million in Q3 2023. The recent acquisition of Ambry Genetics, a leader in genetic testing, for $375 million has introduced additional risk. This acquisition was partially financed through debt, raising concerns over the company's financial stability, although Tempus expects Ambry to contribute over $300 million in revenue for 2024.
Market analysts forecast the global AI market in oncology to skyrocket from $891 million in 2022 to an estimated $10.7 billion by 2032, signalling a significant opportunity for growth in this sector. Tempus, already collaborating with over 200 healthcare companies, including well-known industry players like AstraZeneca and GSK, is positioned to capitalise on this expansion.
In recent comments, Nvidia CEO Jensen Huang highlighted digital biology as the "next amazing revolution," identifying the convergence of AI, big data, and healthcare as pivotal in future innovations. This vision places Tempus in a noteworthy position for potential growth in a rapidly evolving market.
Despite the recent downturn in share price following political developments surrounding the nomination of Robert F. Kennedy Jr. as health secretary—an event that some analysts perceive as an overreaction—investors are eyeing this as a potential buying opportunity. As interest in AI continues to proliferate, Tempus's advancements in cancer care could well position the firm as a leader in the AI healthcare landscape.
Source: Noah Wire Services