TEM Shares Surge on New AI Breakthrough: Should Investors Jump In?

Tempus AI TEM jumped 7.3% at yesterday’s close after securing FDA 510(k) clearance for its ECG-Low EF software, its second greenlighted AI tool in cardiology. The approval adds fuel to a stock already rallying on the back of a solid first-quarter 2025 with revenues up 75%, gross profit nearly doubling and a $200M foundation model deal with AstraZeneca AZN and Pathos.In the past three months, TEM stock has skyrocketed 48.3%, outperforming the 11.9% rise of the Medical Info Systems industry and the Medical sector’s 1% growth. In the meantime, the S&P 500 has improved 18.7%.  The company has also outperformed other players in the health infotech field, like iRhythm Technologies IRTC and SOPHiA GENETICS SOPH, which improved 35.7% and 28%, respectively, during the said period.Share Price ComparisonImage Source: Zacks Investment ResearchWith momentum surging across diagnostics, data, and Artificial Intelligence (AI), Tempus AI is fast becoming a precision medicine powerhouse. For investors, now’s the time to gauge just how big this runway could get.Cardiology Push With New FDA ClearanceThe latest FDA 510(k) clearance for Tempus AI’s ECG-Low EF software marks a strategic expansion of Tempus AI’s clinical diagnostics portfolio and aligns with its core mission to leverage AI for earlier, data-driven interventions. By enabling the identification of patients at risk for low left ventricular ejection fraction, a key indicator of heart failure, directly from standard 12-lead ECGs, the tool enables clinicians to detect serious cardiovascular conditions sooner and at scale. This regulatory milestone builds on the company’s earlier success with ECG-AF and also strengthens its broader push into cardiology, creating synergy across its multimodal data ecosystem.Two Other Major Growth DrivesA $200M Foundation Model Deal With AstraZeneca and Pathos: One of Tempus AI’s significant 2025 milestones is a $200 million, three-year partnership with AstraZeneca and Pathos to build what could become the world’s largest oncology foundation model. This deal boosted Tempus AI’s total contract value to more than $1 billion and highlights strong demand for its multimodal data capabilities. The model will use Tempus AI’s extensive genomic, clinical and outcomes data to improve cancer diagnostics and accelerate drug discovery. Each partner will gain access to the model, and since the agreement is non-exclusive, Tempus AI can pursue similar deals with others. This partnership strengthens Tempus AI’s leadership in AI-driven precision medicine while opening new, long-term revenue streams.Hereditary Testing Momentum (Ambry Genetics Integration): Tempus AI’s hereditary testing business, bolstered by the integration of Ambry Genetics, emerged as another key growth driver in 2025. The segment generated $63.5 million in revenues, reflecting a strong 23% increase in testing volumes, well above initial expectations. This performance highlights the success of Tempus AI’s strategic move to broaden its genomic footprint beyond oncology into inherited disease risk assessment. By offering hereditary testing for conditions such as cancer, cardiovascular diseases, neurological disorders and immunological risks, Tempus AI is tapping into a much larger addressable market of at-risk individuals.Average Target Price for TEM Suggests a Strong UpsideBased on short-term price targets offered by 10 analysts, TEM’s average price target represents an increase of 19.3% from the last closing price of $66.70.Image Source: Zacks Investment ResearchLofty ValuationTEM stock is currently overvalued compared to its industry and peers, as shown in the chart below.The company is currently trading at a forward 12-month price-to-sales (P/S) ratio of 7.34, a premium to the broader industry average of 5.56 and a little below the stock’s one-year median of 8.12. The stock is also trading higher than other industry players like iRhythm (5.78X) and SOPHiA GENETICS (2.80X).Image Source: Zacks Investment ResearchFinal TakeWhile Tempus AI has demonstrated impressive momentum driven by regulatory wins, breakthrough partnerships and accelerating revenue growth, the stock’s lofty valuation relative to industry peers suggests a more cautious near-term approach. Trading at a premium P/S multiple and having already rallied over 48% in three months, much of the near-term optimism may be priced in. However, the long-term fundamentals remain compelling, with strong execution across diagnostics, data licensing, and AI platform development. For now, investors may consider holding this Zacks Rank #3 (Hold) stock as the company continues to scale up its innovation and execute its growth strategy amid an increasingly competitive landscape. 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(TEM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks