The recent downturn in Tesla’s stock is raising concerns about the electric automaker’s standing among the elite “Magnificent Seven” that led a surge in U.S. markets. Experts suggest that Tesla’s troubles may lead to a shift in the group, with discussions swirling about a potential AI-focused replacement.
The “Magnificent Seven” comprises Apple (AAPL.O), Microsoft (MSFT.O), Amazon.com (AMZN.O), Alphabet (GOOGL.O), Meta Platforms (META.O), Nvidia (NVDA.O), and Tesla (TSLA.O). This group orchestrated a remarkable rally last year, propelling Wall Street to record highs. Collectively, they hold a weight of 28.6% in the S&P 500, close to its highest ever, as per LSEG data.
However, Tesla’s struggles, including competition from Chinese EV makers, price cuts, and shrinking margins, have prompted speculation about its future within this esteemed group. Institutional investors are eyeing a successor that can capitalize on the surging demand for artificial intelligence.
“Tesla has a lot of issues with competition from Chinese EV makers, price cuts, shrinking margins, and even Musk said it himself that the Dojo supercomputer is a long shot,” remarked Brandon Michael, senior investment analyst at ABC Funds. He proposed that if a seventh contender were to be added, it should be Broadcom, a leader in custom silicon facilitating the AI revolution.
Tesla’s stock, down nearly 24% this year, experienced a “death cross” on Thursday, signaling potential further losses as the 50-day moving average fell below the 200-day moving average. Challenges such as high borrowing costs, lower government subsidies, and global price cuts contribute to the EV pioneer’s struggles.
Apple, another laggard in the group, faced a 2.94% decline as of the last close. The company’s shares dropped 2.2% on Friday following a forecast of decreased iPhone sales and an overall revenue target $6 billion below Wall Street expectations.
Art Hogan, chief market strategist at B Riley Wealth, noted a shift in investor sentiment, stating, “This is the ‘show me’ year where people are looking at companies’ abilities not just to use AI but to monetize AI; therefore, some of the shine has come off Apple.”
While Tesla and Apple face challenges, optimism around AI has propelled shares of Nvidia by 31% this year, Microsoft by about 9%, and lifted U.S. chipmakers to an all-time high.
The dynamic shift continued as Meta soared 21% to a record high after its first dividend declaration, and Amazon.com (AMZN.O) jumped 6.6%, beating fourth-quarter revenue expectations.
The term “Magnificent Seven” follows earlier investor phrases like FANG and FAANG. Some analysts speculate that the group might shrink to six members, giving rise to a new catchphrase – the “Magnificent Six.” Potential successors like Broadcom and Advanced Micro Devices (AMD.O) are gaining attention, with traders betting on their AI-related capabilities, suggesting a reshaping of the elite group is underway.
