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The Real Reason Investors Can’t Get Enough of Tesla

W Rocky Newman
Tesla Close to Agreement on Opening Its First Factory in China

When someone buys a stock at any price, they are betting it will rise in value over time. When someone sells a stock, they’re assuming the price is going to go down at some point. The side with greater numbers usually determines which side wins the day. And currently, there are a lot more buyers for Tesla than sellers.

In fact, Tesla surpassed General Motors GM last week as the most valuable automaker in the United States, and the two have been neck and neck since. Tesla stock is now trading just a sliver over $300 per share (up from a previous 52-week low of $178), while GM is about $33.70 per share (up from a 52-week low of just over $27). This puts the market capitalization of both companies at about $50 billion.

From the standpoint of making cars today, GM has had a great year. It has come back from near disaster a few years ago to hit all of the marks investors typically look for in buying a stock: record profits, plenty of cash, strong earnings, and solid dividend performance. In fact, GM made about 10 million cars in 2016 while Tesla made 76,000. GM earned a profit of more than $9 billon, or about $900 per car, while Tesla TSLA lost $773 million, or about $10,200 on every car it made, making earnings and dividends impossible. Yet its market capitalization has more than doubled over the past three years.

So what makes Tesla the most valuable?

The answer may be as simple as the concept of a “story stock,” or a stock whose value is less reflective of its past performance in a more traditional way (earnings, dividends, profits, assets, and past growth) and more indicative of future potential defined in a nontraditional way. Story stocks gain their value looking forward rather than backward. They generate excitement or allure with something new and significant that investors want to be part of. Traditionalists would suggest that story stocks can be manipulated by media hype when circumstances are bullish, and tend to shrink away in a bearish market.

As superficial as the possibility of a media-hyped story stock’s valuation sounds, trading based solely on extrapolating aggregated metrics of past performance that mostly ignores the future is a lot like when Sheldon Cooper of The Big Bang Theory was asked to guess the name of the person NASA had picked to go to the International Space Station. He responded “Muhammad Lee,” explaining that since he didn’t know the right answer, his guess had the best statistical probability of answering the question correctly since Muhammad was the world’s most popular first name and Lee the world’s most popular last name.

To be clear, Tesla and its CEO Elon Musk have a story. Rocket launches and high-speed trains in tubes sound cool and draw attention. But there might be more to the plan than a story to be hyped in the media. Many see batteries’ falling costs and increasing performance as the key to electric vehicles overcoming the internal combustion engine. It could be argued that Tesla building the Gigafactory to produce its own batteries adds synergy to this developing puzzle.

Acquiring SolarCity, while sucking cash in the short term, will likely generate more synergy with Musk’s Powerwall, a battery storage system for homes and businesses. If that pulls more battery demand from the Gigafactory, then Tesla’s engineers will have more opportunities to move down the learning curve and find ways to make batteries cheaper and more powerful. As that happens, Musk and Tesla will look more like that contestant on the Wheel of Fortune who sees the puzzle solution early in the game, while the rest of us are guessing to fill in the missing letters.

To be clear, Tesla may not stay ahead of GM for long and yes, those buyers pushing the value of Tesla up to whatever level it gets to are looking very much to the future. An analyst recently suggested that buyers of Tesla stock are about beliefs rather than evidence, and faith, rather than things that are seen. I don’t disagree. But belief only in traditional forms of evidence, decisions based on incremental steps rather than the big picture, and believing in only what can be seen can be costly to the most narrowly focused investors. Like Wheel of Fortune, some people “see” the answer before the rest of us do.

W. Rocky Newman is a professor at Miami University’s Farmer School of Business in Oxford, Ohio.

This article was originally published on FORTUNE.com