Google invested in this hot artificial intelligence (AI) stock — should you, too?

What's a telltale sign that a small artificial intelligence (AI) company has big potential? When a small AI company attracts interest and funding from larger AI companies.

There aren't many AI companies on the planet bigger than Google's parent company, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and few have a more impressive AI track record than Alphabet: The company's Google Brain (now part of Google DeepMind) invented the AI ​​Transformer architecture (the “T” in ChatGPT), while Google DeepMind developed the Go-playing phenomenon AlphaGo and AlphaFold, an AI system that predicts protein structures.

Google teams are certainly aware of innovative new AI technologies, and the company is backing a notable AI startup that had its initial public offering (IPO) last week.

Latest AI IPOs

Eric Lefkofsky founded Tempus AI (NASDAQ: TEM) in 2015 and currently serves as its CEO. The company was originally called Bioin but changed its name to Tempus Health in 2015, Tempus Labs in 2016, and Tempus AI in 2023.

Lefkofsky is no stranger to starting new businesses: He co-founded Groupon and venture capital firm Lightbank in 2008. He has also co-founded InnerWorkings, Mediaocean, Echo Global Logistics and Pathos AI.

Tempus is using AI to provide what it calls “intelligent diagnostics.” Its diagnostic tests are tailored to each individual patient using their clinical data. The company believes this approach will enable doctors to prescribe more effective treatments for their patients and enable researchers to accelerate the discovery and development of new treatments.

On Friday, June 14, 2024, Tempus held its IPO on the Nasdaq stock exchange. The healthcare AI company's shares surged 15% on its first day of trading and closed up almost 9%. Tempus AI's market capitalization is now over $6 billion.

Why does Google love Tempus AI?

The financial relationship between Google and Tempus AI dates back to June 2020, when Tempus issued $330 million worth of convertible notes to Google as part of an agreement to use Google Cloud. About five months later, Tempus provided Google with $80 million worth of preferred stock in partial fulfillment of an original promissory note.

Predictably, Google doesn't always strike these kinds of financial deals with its smaller cloud customers, so what did the tech giant want from Tempus to secure this deal?

I suspect Tempus AI's impressive growth has been a key factor: the company's revenue grew 183% between 2002 and 2023. Tempus is still not profitable, but its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is trending in a positive direction.

The story continues

Tempus AI's customer base demonstrates the value its technology brings. The company's products are used by approximately 95% of the top 20 largest publicly traded biopharmaceutical companies in the world. Tempus partners with more than 200 biopharmaceutical companies. More than 7,000 physicians and over 65% of U.S. academic medical centers use Tempus AI's products.

Should you buy this hot new AI stock?

Risk-averse investors probably won't like Tempus AI, as its stock price can be volatile, and as mentioned above, the company isn't profitable.

However, Tempus estimates that its oncology and neuropsychiatry genomics products target a total market of more than $70 billion. Its data and services products have a target market of at least $119 billion. Tempus believes that its AI application products, with a focus on algorithmic diagnostics, may have a larger long-term market opportunity than all of its other product lines combined.

The use of AI in medical diagnostics is still in its early stages. Tempus AI has already proven it can succeed in this market. The company has an experienced management team and is backed by Google. We believe this hot AI stock could be a good choice for aggressive investors.

Should you invest $1,000 in Tempus Ai right now?

Before you buy Tempus Ai shares, consider the following:

The analyst team at Motley Fool Stock Advisor has identified 10 stocks that investors should buy right now, and Tempus Ai was not among them. The 10 selected stocks have the potential to generate big gains over the next few years.

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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool's board of directors. Keith Speights holds shares in Alphabet. The Motley Fool holds shares in and recommends Alphabet. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

The post Google Invested in This Hot Artificial Intelligence (AI) Stock: Should You Too? was originally published by The Motley Fool.

Sources 1/ https://Google.com/ 2/ https://finance.yahoo.com/news/google-invested-hot-artificial-intelligence-095000745.html The mention sources can contact us to remove/changing this article

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