Shares of Tempus AI (NASDAQ: TEM) plummeted nearly 20% after a scathing short report from Spruce Point raised alarm bells about the company’s fundamentals. Spruce Point's report questioned the credibility of Tempus AI’s management, the integrity of its AI-related products, and its financial reporting.
Tempus AI (TEM)
At the heart of the report is a bold accusation: Tempus AI’s branding is disconnected from its actual financial performance. In 2024, AI-related revenue was reported at just $12.4 million—less than 2% of the company’s total revenue of $693.4 million. The previous year, AI revenue was only $5.5 million.
I’m skeptical—regardless of the short report. There are several red flags that make TEM stock unattractive to me at current levels:
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Lack of profitability: Tempus AI’s net income history is weak. For a supposed high-growth tech company, this is concerning.
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No dividend: With no dividend payout, investors are relying solely on capital appreciation—which may be unreliable given the current financial picture and market sentiment.
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Valuation concerns: At the current price of around $55.6, the stock still trades at a lofty valuation, especially considering its minimal AI revenue. It’s also far from its 52-week low of $22.89, suggesting there may still be room to fall.
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Hype vs. substance: The AI theme has driven many stocks higher in recent years, but not all AI stories are created equal. In Tempus’s case, the disconnect between marketing and revenue contribution is hard to ignore.
Should Investors Consider Buying the Dip?
While some traders may view the selloff as a buying opportunity, betting on a sharp rebound, I believe the risk outweighs the reward here. Momentum-driven recoveries are possible, especially if the company can refute the claims or show real growth in its AI offerings. However, for long-term investors seeking strong fundamentals, transparent leadership, and real revenue growth from core products, TEM doesn't check enough boxes—yet.
Until Tempus AI proves it can convert its AI promise into substantial and sustainable revenue, and address concerns raised in the short report, I’m staying on the sidelines.
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