Tempus AI Stock Soars On Nancy Pelosi's Call Options — But Should Investors Follow? - Tempus AI (NASDAQ:TEM)

Despite the fractious nature of U.S. politics, the American public has reached a consensus: former House Speaker Nancy Pelosi is the undisputed investing champion.

As a result, her acquisition of Tempus AI Inc TEM call options has generated considerable buzz, leading to significant activity in the stock. Still, only the most advanced traders should take the bait.

At first glance, Tempus AI might seem like an alluring investment. A health technology firm, Tempus — as its name suggests — utilizes artificial intelligence to create precision medicine solutions. In addition, the company is involved in diagnostics-based solutions for oncology, cardiology, radiology and depression. Analysts at SkyQuest note that the precision medicine market could reach a valuation of $75.3 billion by 2031, implying a compound annual growth rate of 11.4% from 2024.

While the underlying relevance and potential of Tempus AI has certainly boosted TEM stock, Pelosi has generated substantial buzz. Much of the enthusiasm centers on her uncanny ability to read the market. At the end of December, Pelosi sold 10,000 shares of Nvidia Corp. NVDA worth between $1 million and $5 million.

Not long after, the Chinese AI model DeepSeek sent the tech sector tumbling. Sure enough, NVDA represented the worst-hit name among the so-called Magnificent 7 stocks.

Not surprisingly, retail traders are making the logical connection that if Pelosi knows when to sell a security, she offers an insightful barometer regarding when to buy. Since selling a hot hand takes extraordinary discipline and conviction, it's not at all an unreasonable conclusion. Nevertheless, TEM stock warrants sober analysis before entry.

Tempus Prices in the Expected Filibuster

According to the website of the U.S. Senate, a filibuster is "a loosely defined term for action designed to prolong debate and delay or prevent a vote on a bill, resolution, amendment, or other debatable question." Thus, Tempus represents Wall Street's filibuster in that it consumes considerable trading activity but without clear direction.

For one thing, prospective investors must consider the financial framework. Without earnings and also without a clear path to near-term profitability, Tempus stock is highly speculative. On the top line, analysts are projecting revenue to land somewhere north of $693 million. That puts the projected annual sales growth to approximately 30%.

While the growth sounds impressive, Tempus stock also trades at a sales multiple of nearly 14-times trailing-12-month (TTM) revenue. Generally speaking, the individual segments within the broader healthcare ecosystem feature a revenue multiple no greater than five times. So, from that perspective, Tempus is significantly overvalued.

Sure enough, the hot premium explains the negative bias of Tempus stock. To be 100% clear, there is very limited data available for Tempus, which had its initial public offering last June. Nevertheless, from the data gathered, the negative bias is apparent.

On a week-to-week basis, the stochastic framework (devoid of any other context aside from the temporal) shows that a position entered at the beginning of the period only has a 45.45% chance of rising by the end of it. Over a four-week basis, the odds improve slightly (but are still poor) at 46.67%.

From the time-of-writing trend, Tempus is trending for a 20%-plus return for this week. So far, whenever Tempus posted a double-digit-percentage gain in a one-week period, only one-third of the time did it rise by the end of the fourth subsequent week.

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Neither Bulls Nor Bears Have an Edge

Based on the dynamic condition of Tempus stock posting a one-week double-digit gain, the best odds that traders can hope for is in the next week following the extreme-greed event. Even then, the odds are 50/50, which really means that neither the bulls nor the bears have an edge. And while subsequent weeks technically favor the bears, the sampling size is extremely small. Therefore, Tempus is an advanced volatility hedge.

From the limited statistical evidence available, the median four-week return following an extreme-greed event under the positive scenario stands at a hearty 35.28%. On the other hand, the median loss under the same conditions sits at 11.17%. Assuming that Friday's session closes at $60, Tempus stock could potentially either rise to $81.17 or fall to $52.34 by the options chain expiring Feb. 28.

The problem is that market makers appear to be anticipating high volatility for that expiration date. Therefore, the condors available are unfavorable. Instead, it may be more prudent to consider the options chain expiring one week earlier on Feb. 21.

Again, from the limited data available, it's possible that Tempus stock could rise to $80.63 or fall to $52.36 for that cycle. The most aggressive (but arguably still rational) idea is the 55P | 60P || 75C | 80C long iron condor for the Feb. 21 expiration date. This transaction combines the 55/60 bear put spread and the 75/80 bull call spread, allowing traders to win by an extreme movement in either direction.

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