Innovation Fuels Rally for Tempus AI: Should You Buy the Stock Today?

Tempus AI TEM surged 12.5% in the first week of June, outperforming the broader market and the benchmarks by a wide margin. This rally came largely on the heels of investors’ positive reaction to two back-to-back innovations from the company. The first was the launch of xM, a new liquid biopsy assay for monitoring immunotherapy response in advanced cancer patients and the second was the EHR integration of Tempus One, the company’s generative AI-powered clinical assistant.

Given Tempus AI’s deep healthcare data infrastructure and rising clinical utility, investor optimism appears justified. Let's delve deeper into whether further upside is on the horizon or not.

Strategic Product Innovation

xM Liquid Biopsy Assay: The newly-launched xM is a liquid biopsy using whole-genome sequencing and fragmentomics to detect early molecular responses to immune checkpoint inhibitors (ICIs). It enables noninvasive, real-time treatment monitoring, which is especially valuable for advanced cancer patients.

Tempus One in EHRs: Tempus integrated its AI-powered voice assistant Tempus One into major EHR systems. This tool delivers real-time, patient-specific insights, trial options and guidelines to streamline workflows and enhance decision-making at the point of care.

$200 Million Foundation Model Partnership With AstraZeneca and Pathos

Tempus AI recently announced a landmark three-year, $200 million data and modeling license agreement with AstraZeneca AZN and Pathos to develop the world’s largest oncology-focused foundation model. Leveraging over 300 petabytes of Tempus AI’s multimodal data, the initiative aims to accelerate AI-driven drug discovery and diagnostics. AstraZeneca, TEM’s first strategic biopharma partner, will play a central role in funding compute costs and co-developing the model alongside Pathos. Upon completion, each party will receive a copy of the model, strengthening Tempus AI’s position in precision medicine and expanding AstraZeneca’s oncology innovation capabilities. The deal also raises Tempus AI’s total remaining contract value to over $1 billion.

Deep 6 Acquisition Expands Clinical Connectivity and Data Assets

The acquisition of Deep 6 AI adds valuable clinical trial matching and provider analytics capabilities to Tempus AI’s portfolio. Deep 6’s platform strengthens Tempus AI’s provider connectivity, now totaling over 4,000 connections, and facilitates the two-way exchange of clinical and molecular data. This supports TEM’s goal of constructing rich, outcome-linked datasets that inform both diagnostics and drug development.

Year to date, TEM stock has skyrocketed 83.8%, outperforming the 24.3% rise of the Medical Info Systems industry and the Medical sector’s 2.7% decline. In the meantime, the S&P 500 has improved 2.1%.  The company has also outperformed other players in the health infotech field, like iRhythm Technologies IRTC and SOPHiA GENETICS SOPH, which improved 62.6% and 1.9%, respectively, during the said period.

YTD Price Comparison of TEM

TEM Ahead of Moving Averages Too

Going by the technical indicators, the stock is trading above its 50-day and 200-day moving averages, indicating upward momentum and price stability.

TEM Above the 50 and 200-day SMA

Ongoing Losses Despite Revenue Growth

Tempus reported an adjusted EBITDA loss of $16.2 million in the first quarter of 2025, though it improved from a loss of $43.9 million in the first quarter of 2024. The company remains unprofitable despite record revenues and gross profit growth, highlighting the challenge of achieving profitability.

Is TEM Fairly Valued?

TEM stock is currently overvalued compared to its industry, as shown in the chart below.

The company is currently trading at a forward 12-month price-to-sales (P/S) ratio of 7.77, a premium to the broader industry's average of 6.09 and a little below the stock’s one-year median. The stock is also trading higher than other industry players like iRhythm (6.28X) and SOPHiA GENETICS (2.55X).

Tempus AI is a "Hold" for Now

Tempus AI offers strong long-term potential fueled by genomics growth, expanding data services and a major AI partnership with AstraZeneca. However, this Zacks Rank #3 (Hold) stock trades at a premium to peers and faces stiff competition. The company is yet to deliver positive EBITDA or EPS. While macro trends like drug pricing reform aid, much of the optimism is already priced in. For now, current shareholders should hold their positions, while new investors should wait for a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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