Key Points
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Tempus AI and Recursion Pharmaceuticals are fine ways to play the AI revolution from the health angle.
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Both AI stocks are eyeing a piece of the massive biopharma market as they bring their AI expertise.
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The AI revolution has the potential to reinvent just about every industry. Arguably, the biotech scene is one place that could get a much-needed boost as firms look to leverage new technologies to accelerate the pace of clinical trials or to uncover new treatments and drugs that would have otherwise flown under the radar for the long haul. Indeed, the biotechs, by nature, tend to be quite speculative.
After all, it’s tough to know what “promise” really means with regard to a candidate in a drug pipeline. Until the final trial has been passed, all the promise in the world may only raise the expectations bar until the one big day that will either leave investors delighted or disappointed. Either way, it seems like a job that AI and agents could help make a heck of a lot more efficient.
So, what stands out in the corner of AI and biopharma? Tempus AI (
Let’s have a closer look at the two names so investors have a better sense of which stock is the better long-term candidate to stash in the portfolio.
Tempus AI
Tempus is an exciting AI stock, and not just because “AI” is in the firm’s name. The biotech innovator is using AI to change the landscape of the biotech industry in a way I previously described. Recently, the company expanded its collaboration with Personalis (NASDAQ:PSNL) for work on a cancer test named NeXT Personal. Undoubtedly, it’s a low-risk partnership that could help both firms save many lives.
After shrugging off a short report from Spruce Point Capital earlier in the year, I do think the Cathie Wood stock is worth consideration as shares run into a bit of volatility. Over the past year, shares have gained 53%, but the road has not been a smooth one, with steep booms and busts along the way.
Indeed, high short interest may be a contributing factor behind the intense volatility. And while Tempus is exactly the kind of high-risk/high-reward disruptive innovator that Wood seeks to own shares in, I do think investors should be ready for double-digit percentage volatility in both directions. If you can’t stomach a 50% drop, perhaps TEM stock may not be your cup of tea. If you can handle the choppiness, I’m a fan of the name, given its major partnerships in place and growing portfolio of AI tools and platforms.
Personally, I’m waiting for another big dip before considering buying shares of the $11.1 billion AI disruptor. Shares go for more than 13.6 times price-to-sales (P/S), which isn’t cheap, even for an AI stock.
Recursion Pharmaceuticals
Recursion Pharmaceuticals is another AI company that’s leveraging the technology to innovate in the biotech scene. Perhaps the mid-cap firm is best known as one of the investments of AI chip juggernaut Nvidia (NASDAQ:NVDA). Now, Jensen Huang’s unstoppable GPU empire doesn’t just have a stake in the firm, but a strategic partnership to advance AI-driven drug discovery, arguably one of the hottest themes not just in healthcare but in all of AI.
The AI revolution really has a chance to be revolutionary if the Nvidia-Recursion collab results in something truly transformative for the cost-intensive and, quite frankly, inefficient business of discovering new drugs. In any case, Nvidia’s vote of confidence is no guarantee that Recursion will emerge as the drug-discovery play.
Either way, if Jensen Huang, a man considered by many to be the face of AI, and his firm are in favor of the bet, it’s hard to go against it. For now, Recursion’s active cancer-related programs look the most impressive. As shares look to shrug off a brutal past few years, perhaps there’s deep value to be had in the name.
Though RXRX is compelling, I’m giving the slight edge to Tempus. It’s the much larger company and also has the attention of famed investor Cathie Wood.
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