• Apple: Struggles with AI and China sales
• Tesla: Facing problems amid lower EV demand
• Alphabet: Slow AI progress and advertising challenges, the most undervalued of the «Magnificent 7»

The term «Magnificent 7» refers to seven major U.S. technology firms: Amazon, Meta, Microsoft, Nvidia, Google, Apple, and Tesla.

However, this year’s performance has varied significantly among them, dividing them into three distinct groups: the top performers, the moderate achievers, and the laggards.

With the growing emphasis on artificial intelligence (AI), Nvidia and Meta have taken the lead, while Microsoft and Amazon have shown solid performance. In contrast, the remaining three companies have not kept pace with the S&P 500 index.

Apple

Recently, Apple’s stock hit its four-month low amid increasing worries about its AI strategies and difficulties in the Chinese market.

The company’s stock suffered losses for five consecutive days in early March, mirroring challenges with its main product, the iPhone, which saw a 24%^[1] decrease in sales in China in the first six weeks of 2024.

This downturn is especially alarming considering China accounts for over 17%^[2] of Apple’s total revenue.

To date, Apple’s stock has not performed well, down 6.6% and falling behind the gains of the S&P 500. This downturn is in the wake of Apple shelving its electric vehicle project and the unimpressive debut of the Vision Pro mixed reality headset.

Tesla

One of the biggest stock market stories in 2024 has been Tesla. It stood among the worst performers in the entire S&P 500 sector.

Tesla’s shares have been down more than 27.6%^[3] since the start of 2024. The company’s stock weakness is due to tepid demand for EVs and its expensive market valuation.

The company has the highest Price-to-earnings ratio of 56^[4] in the Magnificent 7 group.

Alphabet

Alphabet’s stock has increased modestly by under 8.9%^[5] this year, lagging behind the S&P 500 index.

It falls short of its rival, Microsoft, which has been quicker in deploying AI technologies. The company experienced a dip in its stock value following controversial outcomes from Google’s AI-driven image creator, Gemini, which halted its deployment to enhance its functionality.

Additionally, a decline in stock value was noted after the announcement of Q4 earnings, with the underperformance largely linked to its fundamental advertising segment not living up to projections.

This situation is exacerbated by the potential impact of generative AI on the future dynamics of internet search, a field Google has long dominated.

These combined factors have made Alphabet the most affordable among the «Magnificent 7» tech giants, with a Price-to-earnings ratio of 22^[6].

Investors can long the Magnificent 7 stock using our 5x Magnificent 7.

Alternatively, traders can short the Magnificent 7 stocks using our -3x Magnificent 7.

1. Counterpoint Research
2. Sec.gov
3. Tradingview
4. Koyfin
5. Tradingview
6. Koyfin