eyeQ: is this one of the few cheap AI plays left?
interactive investor has teamed up with the experts at eyeQ who use artificial intelligence and their own smart machine to analyse macro conditions and generate actionable trading signals. Here’s what it says about this US tech share.
4th June 2024 11:32
by Huw Roberts from eyeQ
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"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
Intel
Trading signal: long-term strategic model
Model value: $38.29
Fair Value Gap: -26.4% discount to model value
Model relevance: 72%
Data correct as at 4 June 2024. Please click glossary for explanation of terms.
A cheap AI play?
Not all semiconductors are created equal. If NVIDIA (NASDAQ:NVDA) is the poster child of the AI revolution, Intel Corp (NASDAQ:INTC) is the unloved orphan. During this huge bull run for artificial intelligence chips, Intel has been ignored. It has underperformed its immediate peers in the sector and the broader equity market.
Is that about to change?
Yesterday, Intel announced its plans for new AI chips - Xeon 6 - for data centres. This comes after the company has recently launched Gaudi 3 for AI model training, and Lunar Lake chips which are specifically designed for AI PCs.
Another hope in that fight is US president Joe Biden’s CHIPS and Science Act, which could provide grants and cheap funding to domestic US chip producers.
Bottom-up research on the sector/the individual companies is needed to decide whether Intel can play catch-up with its rivals. As always, do your own research.
But there is a macro angle. After a period when the big picture stuff didn’t matter, macro is back again. On eyeQ, macro relevance is 72% and model value (where the stock “should” trade given economic growth, inflation, the Federal Reserve, etc) is $38.29.
That leaves the stock 26% cheap to macro conditions. And critically there are fledgling signs that model value is starting to bottom out. There aren’t many cheap AI plays out there. Could this be one?
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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