Tesla’s stock price has fallen 22% in 2024, making it the worst performer among the so-called Magnificent Seven tech stocks that have been driving the S&P 500 to new heights.
- The Magnificent Seven Index, comprising companies benefiting from the AI technology boom, reached a record 29.5% weighting in the S&P 500, but investors don’t view Tesla as an AI play like the other companies in the index.
- Tesla faces unique challenges as the demand for its products is fading, while companies associated with AI are experiencing explosive growth.
- Analysts have lowered their average 2024 profit estimate for Tesla by nearly half in the past year, while expectations for the other Magnificent Seven stocks have risen or remained stable.
- Tesla is viewed as a one-product company with the Model Y, while its other initiatives contribute less to revenue and earnings or are still in experimental stages.
- Slowing electric vehicle demand and uncertain AI credentials have made Tesla’s sky-high valuation hard to justify, with the stock trading at over 60x forward earnings.
- Despite short-term concerns, long-term investors believe Tesla’s unique position as the only profitable, large-scale, pure-play EV maker earns it a place in the elite club, with revenue and earnings growth expected to surpass most other mega-cap tech companies beyond 2024.