Why Tempus AI Stock Plummeted This Week

Extending the more-than-4% slide that they experienced last week, shares of Tempus AI (NASDAQ: TEM) have suffered an even more precipitous decline this week. According to data provided by S&P Global Market Intelligence, the healthcare-oriented artificial intelligence (AI) stock had fallen 13.2% from the end of last Friday's trading session through the market's close on Thursday.

The stock's decline can be singularly attributed to a critical report of the company that a short-seller provided on Wednesday.

Image source: Getty Images.

The long and the short of the short-seller's report

Arguing that investors should be circumspect about the company's financials and its public claims, Spruce Point Capital Management provided the market with a report that questions the credibility of Tempus AI. In addition to questioning the integrity of the company's founder, Eric Lefkofsky, Spruce Point raised doubts about Tempus AI's financial reporting and the nature of its partnership with AstraZeneca -- among other issues.

Based on its analysis, Spruce Point stated that Tempus AI stock has the potential to fall about 50% to 60%. From the stock's closing price on Tuesday (the day before Spruce Point released its report), this implies a stock price of $26.35 to $32.94.

Founded in 2009, Spruce Point is an investment management firm that focuses on short-selling opportunities.

What's an AI-focused investor to do now?

Since Spruce Point stands to profit from Tempus AI stock falling, investors should take its claims with a heaping tablespoon of salt. While it raises some strong accusations against the company, Tempus' supporters are unmoved. Ark Invest, led by Tempus AI bull Cathie Wood, for example, bought 251,080 shares of Tempus AI on Wednesday.

At this point, potential investors will want to exercise caution and see how the company responds.

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.