Why Tempus AI Stock Raced More Than 5% Higher Today

There was nothing artificial about the share price boost enjoyed by artificial intelligence (AI) specialist Tempus AI (NASDAQ: TEM). The company, which concentrates on applying AI functionalities to drug discovery, saw the value of its shares increase by 5% on an analyst update that was optimistic on the company's future.

With that rise, Tempus AI had a better day than the S&P 500 (SNPINDEX: ^GSPC), which bumped 1.1% higher.

A healthy development

Although the update from Cannacord Genuity's Kyle Mikson didn't feature a change in the analyst's Tempus AI price target or recommendation, it did reiterate his sunny outlook on the company. He still rates it a buy, with a $110 per-share price target.

Image source: Getty Images.

The foundation of Mikson's argument is that the company is providing the kinds of cutting-edge medical tech services that can really make an impact on the pharmaceutical market, according to reports. He also feels that the use of AI at scale in clinical practices could juice Tempus AI's revenue growth substantially.

Mikson also waxed bullish about Tempus AI's embrace of growing through acquisitions of complementary assets. For example, in August it announced it had acquired privately held Paige, an AI company that focuses on pathology.

Discovering AI's potential

Drug discovery is an activity ripe for the advancements AI can offer if utilized correctly. Tempus AI seems to be leveraging this advantage well, and its branching out into various medical segments gives it a shot at creating multiple -- and meaningful -- new revenue streams.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.