The healthcare expertise area is gaining monumental traders’ consideration as of late, due to the speedy developments in synthetic intelligence (AI) on this area of interest. Corporations like Tempus AI TEM are main the cost by leveraging AI for precision medication. The inventory’s 42.9% surge yr up to now strongly underscores a broader market shift—highlighting the rising perception that AI-driven healthcare is gaining power as a high-value funding alternative.
Yr up to now, the inventory has outperformed the 6.6% development of the Medical Information Methods industry and the Medical sector’s 3.1% enhance. Within the meantime, the benchmark S&P 500 has declined 5.3%. The corporate has additionally outperformed different gamers within the well being infotech discipline like iRhythm Applied sciences IRTC and SOPHiA GENETICS SOPH, which have improved 16.1% and eight.1%, respectively, throughout the identical interval.
YTD Value Comparability
Picture Supply: Zacks Funding Analysis
The corporate’s climb has been largely fueled by its newest transfer to amass Deep 6 AI, a number one AI firm specializing in scientific trial matching. With this, Tempus can speed up drug improvement timelines and entice extra pharmaceutical and biotech partnerships.
On the similar time, Tempus AI’s outperformance in opposition to iRhythm and SOPHiA GENETICS suggests a powerful market urge for food for AI-powered healthcare improvements.
Nonetheless, is that this momentum sustainable over the long term? And does Tempus AI’s rise point out a broader acceleration in healthcare AI adoption? Let’s delve deeper.
Strategic Acquisition Holds Vital Lengthy-Time period Potential
Tempus AI’s acquisition of Deep 6 AI enhances its scientific trial matching capabilities, accelerating affected person recruitment and drug improvement. Deep 6’s superior algorithms complement Tempus AI’s current platform, strengthening its foothold in AI-driven healthcare.
The February 2025 acquisition of Ambry Genetics additional expanded its genomics capabilities with a West Coast lab and enhanced inherited danger testing. Moreover, a five-year extension with Google ensures cost-efficient cloud infrastructure, which is significant for Tempus AI’s AI-powered options. These strategic strikes place Tempus AI for long-term development, probably boosting TEM inventory as AI-driven healthcare continues to realize traction.
Improvements Driving Development
Tempus AI’s newest analysis, offered on the 2025 American Faculty of Cardiology (ACC) Annual Assembly, highlights AI’s transformative position in cardiovascular care. The corporate’s machine studying fashions predict left ventricular systolic dysfunction for early intervention, whereas EHR-integrated alerts determine sufferers in danger for sudden cardiac arrest. Moreover, echo-driven EHR alerts enhance remedy entry for racial minorities with valvular coronary heart illness and pure language processing (NLP) expertise, enhancing diagnostic accuracy in cardiac transthyretin amyloidosis. These developments reinforce Tempus AI’s management in AI-driven precision medication.
In January, the corporate launched olivia, an AI-enabled private well being concierge app. That is designed to handle two core targets: centralizing sufferers’ well being knowledge and making that knowledge accessible and actionable by means of using AI. Sufferers can join on to greater than 1,000 well being programs by means of digital well being file integration by syncing knowledge from well being gadgets to trace each day metrics or manually add well being data.
Amongst different main developments, Tempus AI launched the FDA-approved, NGS-based in vitro diagnostic machine xT CDx in the identical month. It’s a 648-gene next-generation sequencing take a look at for stable tumor profiling, which incorporates microsatellite instability standing and companion diagnostic claims for colorectal most cancers sufferers.
Each developments are per the corporate’s efforts to enhance affected person outcomes.
CMS Reimbursement to Enhance Adoption
In a current breakthrough, the Facilities for Medicare and Medicaid Companies (CMS) introduced that it will enable reimbursement for the evaluation of cardiac dysfunction utilizing the Tempus ECG-AF algorithm, which is one in every of only a few FDA-authorized medical applied sciences within the nation to be impacted by the brand new CMS resolution. This enables Tempus AI to extra broadly assist clinicians in figuring out sufferers at elevated danger of atrial fibrillation/flutter.
Is TEM Pretty Valued?
TEM inventory is at present barely overvalued in comparison with its business, as proven within the chart beneath.
The corporate is at present buying and selling at a ahead 12-month price-to-sales (P/S) ratio of 6.32, a premium to the broader business’s common of 5.0X. The inventory can be buying and selling larger than different business gamers like iRhythm (4.64X) and SOPHiA GENETICS (2.81X).
Nonetheless, it’s nonetheless beneath its one-year median of 8.68X, implying that it may nonetheless be alternative to purchase.
Picture Supply: Zacks Funding Analysis
Additional, the corporate’s muted earnings per share (EPS) estimate revisions point out that a lot of TEM’s current success might already be priced in. Notably, EPS estimates have been southbound (from a lack of 49 cents per share to a lack of 58 cents per share) over the previous 30 days for 2025.
Picture Supply: Zacks Funding Analysis
A Have a look at a Few Hiccups
Rising Working Bills: Non-GAAP working bills grew 6.5% to $142.5 million within the final reported quarter. The rise in prices, notably in salesforce growth and R&D, means that the corporate is investing in future development, however the quick influence on profitability is inflicting concern.
Conservative EBITDA Outlook: The total-year adjusted EBITDA projection of $5 million was beneath the anticipated practically $6 million, suggesting potential profitability challenges.
Last Take
With strategic alliances, key acquisitions and the current CMS resolution supporting reimbursement for its ECG-AF algorithm, Tempus AI is well-positioned to increase its presence in AI-driven healthcare diagnostics. Whereas robust income technology alerts a wholesome growth technique, a conservative EBITDA outlook displays the corporate’s rising operational prices and powerful deal with long-term investments quite than short-term profitability.
Its costly valuation can be limiting this Zacks Rank #3 (Maintain) inventory’s near-term beneficial properties. Whereas present shareholders ought to maintain their positions, new traders ought to look forward to the inventory to retract a few of its current beneficial properties, offering a greater entry level. You may see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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iRhythm Technologies (IRTC) : Free Stock Analysis Report
SOPHiA GENETICS SA (SOPH) : Free Stock Analysis Report
Tempus AI, Inc. (TEM) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
