Tempus AI Inc (NASDAQ: TEM) came crumbling down on Wednesday after Spruce Point announced a short position in the Chicago headquartered health technology company.
Spruce Point cited several reasons, including account irregularities and eroding ties with key clients like AstraZeneca, for its bet against the Nasdaq listed firm.
Tempus AI shares have been on a tear lately, which is why, despite today’s decline, they’re up more than 40% versus their year-to-date low in early April.
Why is Spruce Point short Tempus AI stock in 2025?
According to Spruce Point, the health-tech firm’s top executives, including board members, have a history of creating “disruptive technology companies” that first make bold claims but ultimately fail at delivering on them.
However, they cash out early and make millions, leaving shareholders with lackluster returns, the investment firm’s short report added.
Additionally, Tempus AI management is misleading investors about their use of artificial intelligence.
The company, based out of Chicago, Illinois, rebranded from “Tempus Labs” to “Tempus AI” last year to capitalise on the AI hype.
Still, artificial intelligence contributed only 2.0% to its overall revenue in 2024, indicating TEM’s ability to tap into AI is grossly exaggerated, the short seller argued.
TEM shares look overvalued at current levels
Investors should be cautious with Tempus AI stock this year, even if many of the recent allegations against the company are ultimately unfounded.
The primary concern lies in valuation. Since the rally that began on April 8, TEM shares have surged beyond what current fundamentals justify.
The company has yet to report a profit or generate positive net cash flow, making its current pricing appear stretched relative to its financial performance.
The Nasdaq listed firm lost $1.58 a share on $693.4 million in revenue last year. In comparison, analysts had called for $696.3 million instead.
Wall Street remains bullish on Tempus AI Inc
Despite Spruce Point’s short report, Wall Street remains reasonably bullish on Tempus AI stock for the remainder of this year.
The consensus rating on the artificial intelligence-enabled health firm sits at “overweight” with the mean target of nearly $65, indicating potential upside of more than 20% from current levels.
Part of the reason could be the company’s Q1 earnings. In the first quarter, TEM generated a little over $255 million in revenue and lost 24 cents on a per-share basis.
Consensus was $248 million and 26 cents a share, respectively.
What’s also worth mentioning here is that influential investor Cathie Wood is long this AI stock as well.
In March, her investment management company loaded up on 400,000 shares of Tempus AI across two of its flagship ETFs.
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