Tempus AI (NASDAQ: TEM) shares plummeted 5.36% in early trading on Wednesday following a damaging report from Spruce Point Capital Management. The investment firm issued a strong sell recommendation on Tempus AI and announced a short position in the company, citing concerns over its AI capabilities and financial practices.

Spruce Point Capital's report, titled "The Tempest Surrounding Tempus AI," raised several red flags about the company. The investment firm highlighted Tempus AI's minimal revenue from AI applications and questioned the quality of its financial metrics. Additionally, Spruce Point expressed skepticism about the track record of Tempus' founder, Eric Lefkofsky, noting his history of promoting disruptive technology companies that often resulted in shareholder losses. These concerns have led Spruce Point to estimate a potential 50%-60% downside risk for Tempus AI's stock.

The market's reaction to the report was swift, with Tempus AI shares already down 2.5% in pre-market trading immediately following Spruce Point's announcement. This negative sentiment persisted into regular trading hours, resulting in the significant 5.36% drop. While Tempus AI recently celebrated its involvement in nearly 1,500 research projects over the past decade, advancing precision medicine, the market appears to be more focused on the concerns raised by Spruce Point Capital, at least in the short term.