Is This Cathie Wood Stock The Next Big Thing?

Tempus AI (NASDAQ:TEM) has seen its stock run all over the board since its IPO last year. The 52-week range for TEM shares runs from a low of $22.89 to a high of $91.45. This is perhaps unsurprising because Tempus is a young, innovative AI startup.

Since the start of 2025, shares have climbed by over 60% so is now the time to buy Tempus following bullish momentum, or is the stock still too speculative?

Key Points

• Tempus AI’s stock has swung between $22.89 and $91.45 since its IPO. While shares surged 60% in early 2025, the company’s speculative nature has investors skittish.

• Revenue grew 30.4% to $693.4M in 2024, with 79% growth expected in 2025 but a high debt-to-equity ratio raises red flags.

• Trading at 12x sales and 172x book value, TEM is expensive for an unprofitable company. 

Why Are Some Investors Bullish on Tempus?

The bullish sentiment surrounding Tempus is derived from the company’s innovative approach to deploying AI in the healthcare field. It applies advanced artificial intelligence, trained on a massive library of clinical data, to help physicians make diagnostic and care decisions. Tempus’ technology is also being deployed to help in the development of new therapies.

The larger the network, the more data becomes available to it, and so the AI models are expected to get even better. Since Tempus started out with an extremely large library of data at its disposal and is already in effect in the real-world, the company is building a moat in AI diagnostics.

Tempus also has the advantage of being an early mover in a fast-growing market. Through, 2030, AI in healthcare is expected to grow at a compounded rate of 38.5%. As an AI company that is already serving healthcare providers, Tempus may have the potential to ride this wave quite successfully.

The largest proponent of this view in the market is Cathie Wood, whose ARK Invest has taken a sizeable position in TEM shares. Two of Ark’s funds, ARKK and ARKG, hold the stock among their top 10 positions.

Wood’s interest in the stock, however, may be cold comfort to investors. Despite amassing a dedicated following during the tech stock run of the early COVID-19 pandemic, Wood has also become famous for overly optimistic outlooks on high-growth stocks.

A 2024 analysis by Morningstar found that ARK Invest had destroyed about $14.3 billion of wealth between 2014 and 2024.

Measuring Tempus Against the Hype

While Tempus doesn’t have a particularly long public history, its Q4 report did give some fairly good insights into how the startup is doing. Revenues for the full year hit $693.4 million, an increase of 30.4% over 2023.

The total value of the company’s contracts at the end of 2024 was $940 million, and the net revenue retention rate was an impressive 140%. In terms of revenue growth, therefore, it’s safe to say that 2024 was a fairly good year for Tempus.

Management’s outlook for 2025 was also quite strong. The company expects to see additional revenue growth of 79%, bringing its 12-month revenues to a total of $1.24 billion. EBITDA, which in 2024 was negative $104.7 million, is also expected to go into positive territory with a total of $5 million by the end of this year.

On the plus side, the network of providers using Tempus AI reached around 3,000 and another piece of good news is that cardiac assessments are now covered under Medicare and Medicaid, so potentially expanding their application.

Where the 2024 report turned negative, though, was the net loss reported by the company. In 2024, the company reported a loss of $705.8 million, translating to $6.23 in net loss per share. Even on an adjusted basis, the net loss per share was still $1.58, suggesting that the company has a very long way to go before it will be able to achieve profitability.

Despite positive revenue growth and a solid revenue retention rate, shareholders haven’t been particularly impressed with Tempus’ 2024 results. Shares tumbled by 17% during the last week of February, causing TEM to give up some of the gains it had previously made in 2025 so far.

Is Tempus Stock Cheap Now?

The price volatility TEM shares have been through has left them looking anything but undervalued. Tempus AI is still far from generating positive earnings, but the stock is trading at about 172x book value and about 12x sales.

Though the price-to-sales ratio isn’t egregious for a high-growth startup, it seems that management doesn’t have much room for error at today’s pricing.

Analysts have assigned an average price target of $62.70 to TEM shares, 11.6% higher than the current trading price.

While a potential return of nearly 12% is respectable, it may not be enough to entice investors to a stock that is both quite risky and extremely volatile.

Is Tempus AI Stock a Buy Now?

With a high debt to equity ratio of 8.2, limited upside to analysts price target of $62.70 per share and a history of volatility Tempus AI is not a compelling buy now.

At the moment, there are quite a few unanswered questions about Tempus AI’s trajectory. Although there’s a strong argument to be made for the company’s early-mover status in a market that could see extremely strong growth over the next several years, it’s not entirely clear how strong Tempus’ moat will prove to be.

Where concerns lie is where Peter Lynch, renowned investor, used to focus his attention, and that’s the balance sheet and the debt levels in particular. Tempus AI’s debt-to-equity ratio of 8.2 is stunningly high, but the current ratio of 2.7 so in the short-term there’s no reason to expect an insolvency threat or even a liquidity one.

An often overlooked part of the equity structure of a business is the dilution that happens from stock-based compensation and for Tempus shareholders, this is a real concern as the share count spirals to ever higher levels.

In Q3 of last year, for instance, the number of outstanding shares of TEM rose by over 160% on a year-over-year basis. In 2024, the company reported $534 million of stock-based compensation expenses. With profitability still likely a ways off, it’s difficult to say how diluted the company’s shares could become by the time it’s able to report positive per-share earnings.

At the end of the day, Tempus AI seems to have great potential as a business and is taking full advantage of the rapid growth of AI in the medical field. The risks, however, could simply be too large for most investors to stomach. Between a high price tag relative to current performance and a lack of clarity on how strong the company’s moat will be, TEM shares seem fairly speculative at the moment.

While highly risk-tolerant growth investors may find something to like in Tempus AI, the stock doesn’t appear to be a particularly good buy right now. Investors may want to keep an eye on Tempus, though, as the company’s prospects could become clearer in the future. The volatility surrounding the stock could also deliver more attractive buying opportunities that could somewhat mitigate the risks associated with Tempus AI.