Tempus AI Plummets 3.3% Amid FDA Hype and Billionaire Profits: What’s Fueling the Volatility?

Summary
• Tempus AI (TEM) trades at $99.84, down 3.3% from its $103.25 previous close
• Intraday range spans $99.30 to $104.32, hitting a 52-week high of $104.32
• Recent FDA clearance for Tempus xR IVD and Trump’s pediatric cancer AI executive order drive optimism

Tempus AI’s volatile session reflects a tug-of-war between regulatory tailwinds and profit-taking pressures. The stock’s 3.3% decline follows a surge past $100, fueled by FDA breakthroughs and a $54 million institutional stake from billionaire Cliff Asness. With options volatility surging and sector peers like Thermo Fisher (TMO) dipping 0.66%, investors are parsing whether this correction is a buying opportunity or a warning sign.

FDA Breakthrough and Executive Order Ignite Volatility
Tempus AI’s price action stems from a collision of regulatory momentum and institutional positioning. The FDA clearance for its Tempus xR IVD device in late September—a tool for RNA sequencing in cancer therapy—cemented its role in precision medicine. Simultaneously, President Trump’s executive order promoting AI solutions for pediatric cancer amplified sector optimism. However, the stock’s 3.3% drop suggests profit-taking after hitting a 52-week high, exacerbated by elevated short-term technical indicators like an RSI of 71.21 (overbought) and a bullish K-line pattern. Billionaire Cliff Asness’s $54 million stake, now up 60%, also highlights the stock’s appeal to long-term AI-focused investors.

Health Care Tech Sector Rally Amid AI Innovation Momentum
The Health Care Technology sector, led by Thermo Fisher Scientific (TMO), has seen mixed performance. While Tempus AI’s 3.3% decline contrasts with TMO’s 0.66% dip, both stocks reflect broader sector dynamics. AI-driven diagnostics and regulatory advancements are central to the sector’s narrative, with Tempus AI’s FDA clearance and Trump’s executive order acting as catalysts. However, Tempus’s higher volatility—evidenced by a 5.99% turnover rate—underscores its speculative nature compared to TMO’s more stable institutional profile.

Options Playbook: Leveraging Volatility in a Volatile Market
• MACD: 4.74 (bullish), Signal Line: 3.42 (bullish), Histogram: 1.32 (positive divergence)
• RSI: 71.21 (overbought), Bollinger Bands: $98.87 (upper), $86.59 (middle), $74.30 (lower)
• 200-day MA: $60.55 (far below current price), 30-day MA: $83.54 (support)

Tempus AI’s technicals suggest a short-term overbought condition but a strong bullish trend. Key levels to watch include the 200-day MA ($60.55) as a critical support and the $98.87 Bollinger upper band as resistance. The 71.21 RSI indicates potential near-term exhaustion, but the stock’s 5.99% turnover rate and $57.8 million volume suggest liquidity remains robust. With Thermo Fisher (TMO) down 0.66%, sector-wide caution persists, but Tempus’s AI-driven fundamentals remain intact.

Top Options Contracts
1. TEM20251017P99 (Put):
• Strike: $99, Expiry: 2025-10-17, IV: 77.70%, Leverage: 21.60%, Delta: -0.4609, Theta: -0.0362, Gamma: 0.0328, Turnover: $160,325
• IV (high volatility), Leverage (high potential return), Delta (moderate sensitivity), Theta (modest time decay), Gamma (strong price sensitivity), Turnover (high liquidity)
• This put option offers a balanced risk-reward profile. With a 21.60% leverage ratio and 77.70% implied volatility, it benefits from a 5% downside scenario (projected price: $94.85). Payoff: max(0, $99 - $94.85) = $4.15 per contract. Ideal for hedging against a pullback while retaining upside flexibility.

2. TEM20251017P100 (Put):
• Strike: $100, Expiry: 2025-10-17, IV: 77.29%, Leverage: 19.48%, Delta: -0.4939, Theta: -0.0187, Gamma: 0.0331, Turnover: $246,745
• IV (high volatility), Leverage (high potential return), Delta (moderate sensitivity), Theta (low time decay), Gamma (strong price sensitivity), Turnover (high liquidity)
• This put contract excels in a bearish scenario. A 5% downside (to $94.85) yields a payoff of max(0, $100 - $94.85) = $5.15 per contract. The low theta (-0.0187) minimizes time decay, making it a durable hedge. High turnover ($246,745) ensures liquidity for entry/exit.

Trading Outlook: Aggressive bulls may consider TEM20251017C100 (Call) if the stock breaks above $100.50, leveraging its 22.08% leverage ratio. However, the 39.19% price change ratio suggests caution. For a bearish play, TEM20251017P99 and TEM20251017P100 offer structured downside protection. Watch for a breakdown below $98.87 (Bollinger upper band) or a rebound above $104.32 (52-week high).

Backtest Tempus AI Stock Performance
Below is the interactive event-study report. It evaluates every –3 % (or worse) one-day drop in Tempus AI (TEM.O) since 2022 and tracks performance for 30 trading days afterwards.How to read it:• The table shows average cumulative return vs. the benchmark after the drop; win-rate is the percentage of events with positive return. • “Not significant” indicates that, at conventional confidence levels, the edge isn’t statistically strong. • You can hover or switch to the chart tab for the equity-curve of a strategy that buys at close of the plunge day and exits after N days.Headline takeaways:1. Short-term weakness: the next-day median return is slightly negative (-0.5 %), and win-rate < 50 %. 2. Mean-reversion sets in after about a week: by day 10, average gain is +4.4 %. 3. Best 30-day holding window: day 30 shows +17.2 % vs. +14.5 % benchmark, with ~70 % win-rate, but still not statistically compelling.Let me know if you’d like:• Different plunge thresholds (e.g., –5 %), • A shorter/longer post-event window, • Risk-managed trading rules (stop-loss / take-profit), or • Benchmark-adjusted alpha significance tests.Happy to refine the analysis.

Bullish Fundamentals vs. Bearish Technicals: What’s Next for Tempus AI?
Tempus AI’s 3.3% decline masks a stock still riding strong fundamentals: FDA validation, AI-driven innovation, and a $54 million institutional stake. However, technicals like an overbought RSI (71.21) and a 5.99% turnover rate signal caution. The sector’s mixed performance—Thermo Fisher (TMO) down 0.66%—adds complexity. Investors should monitor the $98.87 Bollinger upper band and $99.30 intraday low as critical levels. For now, the stock’s trajectory hinges on whether the 52-week high of $104.32 holds or if profit-taking accelerates. Action Alert: Position puts like TEM20251017P99 for downside protection, and watch for a breakout above $100.50 to reignite bullish momentum.