Are Big Tech Stocks Still Worth Investing in as Tesla Stock Tumbles?
Written by
Gina Hagler
Edited by
Nicholas Morine
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You may have heard about Tesla’s shares being down about 40% year-to-date and wondered if this downward trend will affect the stock price of the other companies comprising the so-called “Magnificent Seven” — Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta. Last week, the Magnificent Seven stocks collectively lost a record high $950 billion in market value, per Benzinga (via Business Insider). Despite these losses, the group’s stocks continue to dominate the S&P 500.
Tesla Sales Underperforming
Tesla is performing poorly due to slow sales of electric vehicles (EVs) in the U.S. and the rest of the world. Even in China, which is the largest EV market globally, Tesla has been overtaken overtaken in sales by BYD, Co. Ltd., a Chinese company that sells an EV model for under $10,000. This price point is far lower than that of Tesla’s lowest-priced model, notably. Based on Tesla’s drop in performance, Bloomberg declared Tesla as having lost its spot in the Magnificent Seven — now the Magnificent Six.
This prompts the question of how the Magnificent Six are going to maintain their presence. According to Nael Fakhry, co-chief investment officer at Osterweis, these companies cannot be ignored by owners of U.S. equities, as The Wall Street Journal detailed. AI technology continues to grow strongly, meaning Nvidia, a leader in AI chips, is thriving over Tesla. Meanwhile, Microsoft has performed well with first-quarter earnings for several years now, having beaten their earnings per share and sales estimates for the last six years.
Bob Kalman, co-founder and senior portfolio manager at Miramar Capital, said that substantial performance drops from the former or current Magnificent Seven might cause the stock market to have a higher selloff, where other market areas — like industrials and financials — offer better value.
The Bottom Line?
Your holdings in the Magnificent Six are not facing the same pressures as Tesla, and as yet appear to be staying strong.
What the future holds, however — including the question of whether the precipitous rise in valuation of AI stocks will continue — remains uncertain.
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