Picture supply: Getty Pictures
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 every of them.
Looking for huge potential AI winners
The investing theme of 2024 was undoubtedly artificial 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 stock up 742% following the discharge of ChatGPT in November 2022. Shares of AI software program agency Palantir Applied sciences have finished even higher — up practically 1,000% over the identical interval!
Nevertheless, there are prone to be extra huge AI winners because the know-how improves and is utilized to different areas. Tempus AI (NASDAQ: TEM) would possibly simply be a type of.
Utilizing AI to remodel most cancers care
Google-backed Tempus owns the world’s largest library of medical and genomic information, together with over 6m affected person data. It specialises in utilizing AI and information analytics to advance precision drugs, notably in oncology, by making sense of those huge unstructured datasets.
Physicians and researchers can use its AI-driven insights to personalise affected person care and pace up drug improvement. The agency’s mission is “to assist be certain that sufferers are on the correct drug on the proper time“.
Scottish Mortgage Funding Belief is extremely bullish on the corporate. Its portfolio director lately wrote: “Tempus sits on the intersection of two thrilling traits — genomic profiling and artificial intelligence-driven well being information…Wanting ahead, we keep a excessive conviction in its capability to supply excessive long-term returns, by utilizing AI to remodel most cancers care.”
Monetary efficiency
The agency is rising strongly. In Q3, income elevated by 33% 12 months on 12 months to $181m. For the total 12 months, administration expects roughly $700m in income, which might signify 32% growth.
Founder and CEO Eric Lefkofsky commented: “The general enterprise carried out effectively in the quarter, as demonstrated by accelerating quantity growth in our genomics enterprise and accelerating income growth in our information and providers enterprise.”
Nevertheless, Tempus just isn’t but worthwhile, and recorded a web loss of $75.8m in Q3. Investing in a loss-making enterprise would definitely add danger for me.
Additionally, the agency introduced the acquisition of Ambry Genetics, a pacesetter 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 danger, though Tempus ought to nonetheless have round $350m in money following this acquisition.
The following wonderful revolution
Wanting forward, analysts reckon the worldwide market measurement of AI in oncology may develop from $891m in 2022 to $10.7bn in 2032. Tempus is a pacesetter in this space, working with over 200 healthcare corporations, together with AstraZeneca and GSK.
In early 2024, Nvidia CEO Jensen Huang stated: “The place do I feel the subsequent wonderful revolution goes to return? There’s no query that digital biology goes to be it.”
Digital biology is the fusion of AI, huge information, and healthcare. Due to this fact, Tempus appears to be like well-positioned for sturdy long-term growth.
The share worth has crashed 50% since Donald Trump nominated Robert F Kennedy Jr to grow to be well being secretary. That appears like an enormous overreaction to me, and I’m considering benefiting from the dip.