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With the New Year right around the corner, I've been brainstorming stock buying ideas for my portfolio. Here is one of them.
<h2 class="wp-block-heading" id="h-searching-for-big-potential-ai-winners”>Looking for potential big ai winners
The investment theme of 2024 was, without a doubt, artificial intelligence (ai). This revolutionary technology has captured the public's imagination in ways not seen since the birth of the Internet.
NVIDIA has been the standout winner so far, with its shares rising 742% following the launch of ChatGPT in November 2022. ai Software Company Stock Palantir Technologies They have done even better: almost 1000% more during the same period!
However, there are likely to be more big winners from ai as the technology improves and is applied to other areas. Tempus ai (NASDAQ: TEM) could be one of them.
<h2 class="wp-block-heading" id="h-using-ai-to-transform-cancer-care”>Using ai to transform cancer care
Tempus, powered by Google, has the world's largest library of clinical and genomic data, including more than 6 million patient records. He specializes in using artificial intelligence and data analytics to advance precision medicine, particularly in oncology, by making sense of these huge unstructured data sets.
Doctors and researchers can use their ai-powered insights to personalize patient care and accelerate drug development. The mission of the firm is “to help ensure patients take the right medicine at the right time“.
Scottish Mortgage Investment Trust is incredibly optimistic about the company. Its portfolio manager recently wrote: “Tempus sits at the intersection of two exciting trends: genomic profiling and ai-powered health data… Looking ahead, we maintain strong conviction in its ability to deliver extreme long-term returns, using ai to transform cancer care..”
Financial performance
The company is growing strongly. In the third quarter, revenue increased 33% year-over-year to $181 million. For the full year, management expects approximately $700 million in revenue, which would represent growth of 32%.
Founder and CEO Eric Lefkofsky commented: “The overall business performed well in the quarter, as evidenced by accelerating volume growth in our genomics business and accelerating revenue growth in our data and services business..”
However, Tempus is still not profitable and posted a net loss of $75.8 million in the third quarter. Investing in a loss-making business would certainly add risk for me.
Additionally, the firm announced the acquisition of Ambry Genetics, a leader in genetic testing. This was for $375 million in cash ($300 million of this financed by debt) and $225 million in stock. It expects Ambry to generate more than $300 million in revenue and more than $40 million in EBITDA by 2024.
Debt adds more risk, although Tempus should still have around $350 million in cash following this acquisition.
The next amazing revolution
Looking ahead, analysts estimate that the global ai in oncology market size could grow from $891 million in 2022 to $10.7 billion in 2032. Tempus is a leader in this area, working with more than 200 healthcare companies. medical, including AstraZeneca and GSK.
In early 2024, Nvidia CEO Jensen Huang said: “Where do I think the next amazing revolution will come? There is no doubt that digital biology will be.”
Digital biology is the fusion of ai, big data and healthcare. Tempus therefore appears well positioned for strong long-term growth.
The stock price has plummeted 50% since Donald Trump nominated Robert F. Kennedy Jr. to become health secretary. That seems like an overreaction to me and I'm considering taking advantage of the dip.
