eyeQ: a rare chance to buy this tech stock cheaply
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. It thinks this AI stock’s recent sell-off is not justified.
24th July 2024 11:04
by Huw Roberts from interactive investor
Share on
Advanced Micro Devices
Trading signal: long-term strategic model
Model value: $181.99
Fair Value Gap: -18.18% discount to model value
Model relevance: 80%
Data correct as at 24 July 2024. Please click glossary for explanation of terms.
Vibe shift
In the past few weeks, it feels like investing has become as polarised as politics. Either you retain faith in the big-tech champions that have dominated markets for years; or you feel there’s a change of guard brewing, that small stocks and value plays can start a prolonged period of catch-up.
Why the shift in vibes?
Partly it’s macro – weaker inflation and some signs of weaker economic data have reinvigorated hopes of Federal Reserve interest rate cuts once again. Rate cuts should help small-caps which typically are less profitable (reliant on a healthy economy) and more reliant on external financing relative to the big-tech safe havens that have huge piles of cash.
And partly its politics. The winners under a Trump presidency could look very different. Watch this week’s “Why the Trump trade is going to be a big deal” video.
If you think things are changing, you can stop reading now. This signal isn’t for you.
If you’re in team “big tech”, semiconductor giant Advanced Micro Devices Inc (NASDAQ:AMD) is now 18% cheap to overall macro conditions. That’s very much the cheap end of ranges and a relatively rare occurrence.
This latest sell-off is not justified by macro conditions which are holding up. In short, if you believe the AI story has more to run yet, AMD offers a comparatively cheap entry level to one of the key players.
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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The value of your investments may go down as well as up. You may not get back all the money that you invest.
Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser.
Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
Please note that our article on this investment should not be considered to be a regular publication.
Details of all recommendations issued by ii during the previous 12-month period can be found here.
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