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With the New 12 months upon us, I’ve been drawing up concepts for shares to purchase for my portfolio. Right here’s one in all them.
Looking for huge potential AI winners
The investing theme of 2024 was undoubtedly synthetic intelligence (AI). This revolutionary know-how has captured the general public’s creativeness in methods not seen for the reason that delivery of the web.
Nvidia has been the standout winner to this point, with its replenish 742% following the discharge of ChatGPT in November 2022. Shares of AI software program agency Palantir Applied sciences have carried out even higher — up almost 1,000% over the identical interval!
Nonetheless, there are more likely to be extra huge AI winners because the know-how improves and is utilized to different areas. Tempus AI (NASDAQ: TEM) may simply be a type of.
Utilizing AI to rework most cancers care
Google-backed Tempus owns the world’s largest library of scientific and genomic knowledge, together with over 6m affected person information. It specialises in utilizing AI and knowledge analytics to advance precision drugs, notably in oncology, by making sense of those large unstructured datasets.
Physicians and researchers can use its AI-driven insights to personalise affected person care and velocity up drug growth. The agency’s mission is “to assist make sure that sufferers are on the proper drug on the proper time“.
Scottish Mortgage Funding Belief is extremely bullish on the corporate. Its portfolio director just lately wrote: “Tempus sits on the intersection of two thrilling traits — genomic profiling and synthetic intelligence-driven well being knowledge…Wanting ahead, we preserve a excessive conviction in its capability to supply excessive long-term returns, by utilizing AI to rework most cancers care.”
Monetary efficiency
The agency is rising strongly. In Q3, income elevated by 33% yr on yr to $181m. For the complete yr, administration expects roughly $700m in income, which might signify 32% progress.
Founder and CEO Eric Lefkofsky commented: “The general enterprise carried out nicely within the quarter, as demonstrated by accelerating quantity progress in our genomics enterprise and accelerating income progress in our knowledge and providers enterprise.”
Nonetheless, Tempus will not be but worthwhile, and recorded a internet lack of $75.8m in Q3. Investing in a loss-making enterprise would definitely add threat for me.
Additionally, the agency introduced the acquisition of Ambry Genetics, a frontrunner in genetic testing. This was for $375m in money ($300m of this financed through debt) and $225m in shares. It expects Ambry to generate over $300m in income and generate greater than $40m in EBITDA for 2024.
Debt provides additional threat, regardless that Tempus ought to nonetheless have round $350m in money following this acquisition.
The following superb revolution
Wanting forward, analysts reckon the worldwide market dimension of AI in oncology might develop from $891m in 2022 to $10.7bn in 2032. Tempus is a frontrunner on this space, working with over 200 healthcare firms, together with AstraZeneca and GSK.
In early 2024, Nvidia CEO Jensen Huang stated: “The place do I believe the subsequent superb revolution goes to come back? There’s no query that digital biology goes to be it.”
Digital biology is the fusion of AI, huge knowledge, and healthcare. Subsequently, Tempus appears well-positioned for robust long-term progress.
The share worth has crashed 50% since Donald Trump nominated Robert F Kennedy Jr to change into well being secretary. That appears like an enormous overreaction to me, and I’m contemplating profiting from the dip.
