eyeQ: this US tech favourite is riskiest bet right now
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Here, it looks at the most expensive Mag7 stock.
28th January 2025 10:29
by Huw Roberts from eyeQ
"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
Tesla
Macro Relevance: 77%
Model Value: $374.87
Fair Value Gap: +5.61% premium to model value
Data correct as at 28 January 2025. Please click glossary for explanation of terms. Long-term strategic model.
It was already shaping up to be a big week given earnings updates from four of the Magnificent 7. Now those results assume even greater importance given the DeepSeek news, which poses the first real test of the artificial intelligence (AI) revolution.
Intuitively, most focus will be on Microsoft Corp (NASDAQ:MSFT) and Meta Platforms Inc Class A (NASDAQ:META), which both report on Wednesday. They’re the more obvious pure AI plays and both have announced significant increases in capital expenditure in this area.
However, from eyeQ’s perspective Tesla Inc (NASDAQ:TSLA), which also reports on Wednesday looks like the most worrisome on two fronts:
1) In valuation-gap terms (i.e. relative to the broad macro environment), it screens as the most expensive Mag7 stock. It’s modest in outright terms - just 5.61% - but is still more than its technology peers
2) Macro momentum has recovered a little but has spent much of January falling hard. At the start of November (i.e. pre-US election) eyeQ model value for Tesla was $223.64. The “Trump bump” saw that rise to a high of $453.96 on 15 January. But since then, it’s fallen 17% to its current level of $374.87. And Tesla’s share price is lagging that deterioration in macro conditions.
The critical question for retail investors this week is whether they view DeepSeek as a game changer, or noise within a long-term investment theme. Playing the long game is, more often than not, the right course of action.
Furthermore, there are some positive spins on all this – cheaper AI should be good for economic growth, this could accelerate the US-Chinese AI arms race, meaning even greater capex spending ahead. Wednesday’s results will be key, so waiting for them is probably prudent.
But, for more tactical investors worried about further downside in the near term, it’s Tesla where eyeQ sees the greatest risks right now.
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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Disclosure
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