What happened

Nano-X Imaging (NASDAQ:NNOX), also known as Nanox, is a pre-revenue, pre-approval medical imaging company, and its stock dropped 25.5% in December, according to data provided by S&P Global Market Intelligence. In my opinion, there wasn't company-specific news during the month to warrant the drop. The stock was probably just taking a step back after surging an incredible 122% in November.

So what

Nanox is a controversial stock. Everybody's talking about its secretive technology that promises to make medical imaging better, more affordable, and, therefore, more accessible. However, some believe the company is phony, leading to sharp declines in its stock price. To silence its critics, Nanox did the best thing it could have done: a live demonstration of its Nanox.ARC device.

A rising red arrow breaks near the top, resulting in the tip of the arrow pointing down.

Image source: Getty Images.

The live demo was announced in November, which is why Nanox stock surged during that month. But the demonstration took place on Dec. 3, and Wall Street's response was more muted. It seems some were disappointed that the Nanox.ARC was used on dummies, instead of real people.

Now what

Whatever the reason for Nanox stock's decline in December, a valid bear argument remains: Nanox still isn't generating revenue because its product hasn't received regulatory approval. The company hopes for approval this year and already has over 5,000 pre-orders. That said, if it does receive regulatory approval (something outside of its control) then it still has to demonstrate the Nanox.ARC can be manufactured in large quantities without issues -- which is not a foregone conclusion.

However, even though there are valid concerns, Nanox's potential is mind-numbingly large. Beyond potentially being a better version of X-ray technology (something with universal utility), its digital imagery could have benefits exceeding that of traditional X-rays, as its recent press release demonstrates. Nanox and USARAD Holdings renewed their collaboration for image analytics.

Artificial intelligence, when properly set up, can process large data sets far better than humans. Medical images have many patterns, often so minute that a person could easily overlook certain markers. However, since Nanox's technology promises digital imagery, large data sets can be plugged into the AI program and possibly provide doctors and patients with better medical insights. It's just one of the promising possibilities technology like this could provide years down the line.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.