Tempus AI (TEM) is soaring 13% today after investment bank TD Cowen reinstated coverage of the shares with a Buy rating.

TEM provides next generation sequencing diagnostics, polymerase chain reaction profiling, and molecular genotyping.

A doctor delivering the results of an epigenetics-based clinical test to a patient.

Why TD Cowen Is Bullish on TEM

TEM's acquisition of Ambry Genetics, which recently closed, should improve TEM's products and enable it to move into new markets, TD Cowen believes.

Noting that Ambry is a profitable testing laboratory that generates more than $300 million of revenue annually, the investment bank thinks that the deal will enable TEM to start generating positive free cash flow going forward.

Moreover, Ambry will also increase TEM's margins, according to TD Cowen, which placed a $74 price target on TEM.

On the negative side, the bank did note that Ambry is growing more slowly than TEM at this point.

More Information About TEM

In the first 23 days of 2025, Cathie Wood's Ark Invest company had acquired over 600,000 shares of Tempus AI.

Analysts on average expect TEM's revenue to jump to $994 million in 2025 from $693 million in 2024.

In the last month, TEM stock has jumped 85%, while it has risen 22% in the last three months.

While we acknowledge the potential of TEM, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TEM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.