A new growth stock, Tempus AI (NASDAQ: TEM), recently went public on 14 June. This healthcare firm utilizes artificial intelligence (AI) to assist physicians in personalizing patient care. Founded in 2015, Tempus AI’s revenue is increasing rapidly and it is supported by Google. The company’s mission is to integrate AI into diagnostics to enable personalized, data-driven decisions for improved patient care, with a focus on cancer treatment. CEO Eric Lefkofsky, who previously co-founded Groupon, founded Tempus after his wife’s cancer diagnosis to address the lack of personalized data in her treatment.
Tempus AI raised $410m during its IPO, with investors including Softbank and Scottish Mortgage Investment Trust. The company generates revenue through genomics diagnostics tests and partnerships with pharmaceutical companies for access to its clinical oncology insights. Its Tempus One product, an AI-powered clinical assistant, provides real-time insights for physicians at the point of care. Tempus AI is experiencing rapid growth, with revenue projections as follows: $188m in 2020, $258m in 2021, $321m in 2022, and $532m in 2023.
Despite its growth, Tempus AI is still operating at a loss, reporting a net loss of $214m in the previous year. The company expects to achieve positive EBITDA in 2025 but may require additional funding in the future. The stock price has been volatile, reaching $40 post-IPO before falling to $23 and rebounding to $32. With a market cap of $4.8bn and a price-to-sales multiple of around eight, the stock may be considered pricey.
While the potential for growth is strong, investing in Tempus AI carries risks due to its current financial situation. The company faces competition in the AI space, and its business model is yet to be fully proven. While the firm estimates its addressable markets to be over $200bn, it is still early to determine if Tempus AI will be the next big AI winner like Nvidia. As of now, there may be safer growth stocks to consider investing in.