Nvidia Leads, Tesla Lags Among Magnificent Seven Stocks: Q1 Market Shake-Up

Among the so-called Magnificent Seven technology companies, Nvidia Corp NVDA and Tesla Inc TSLA have emerged as standout performers, albeit in contrasting directions.

What Happened: Apple Inc AAPL and Tesla suffered double-digit declines in the first three months of the year, according to the Wall Street Journal.

The other Mag7 stocks include Nvidia, Microsoft Corp MSFT, Alphabet Inc GOOGL GOOG, Amazon.com Inc AMZN and Meta Platforms Inc META.

Among these companies, Nvidia’s stock has soared the highest, spiking 85% over the first quarter this year. Tesla’s stock, meanwhile, has struggled to maintain momentum, marking a notable shift in market dynamics. It’s down 20%.

Chart: Benzinga Pro

Nvidia, known for its graphics processing units (GPUs) and artificial intelligence (AI) technologies, saw its stock rise by 245% in 2023. Shares continued their ascent in 2024. Nvidia’s stock is up about 85% YTD.

Also Read: Nvidia Captures 92% of Data Center GPU Market, Underlining US Leadership in Generative AI

With its stock posting impressive returns, Nvidia has solidified its position as a frontrunner among the Magnificent Seven. The stellar performance of Nvidia’s stock can be attributed to several key factors:

• Generative AI adoption: The widespread adoption of generative AI, particularly in applications like ChatGPT, sparked immense interest and demand for Nvidia’s technology.
• Data center dominance: Nvidia’s data center platform emerged as the primary beneficiary of the AI boom, with robust demand driving significant revenue growth.
• Product innovation: Nvidia’s continuous innovation in data center GPUs, including the release of the H100 and anticipation for the H200 and Blackwell architecture-based GPUs, fueled investor confidence and excitement.
• 2023 performance: Nvidia’s exceptional stock performance in 2023, fueled by blockbuster quarterly results and revenue growth, laid a strong foundation for continued momentum in 2024.
• Q4 earnings report: The release of Nvidia’s Q4 fiscal year 2024 earnings report, showcasing remarkable revenue and EPS growth, especially in the data center segment, further boosted investor sentiment and propelled the stock upward.

Also Read: Elon Musk’s Wealth Takes A $40 Billion Hit In 2024

Tesla Stock Impacted By Company Headwinds

In stark contrast to Nvidia’s upward trajectory, Tesla, the electric vehicle (EV) pioneer led by Elon Musk, has encountered challenges in the first quarter.

Despite its revolutionary advancements in sustainable transportation and energy solutions, Tesla’s stock has experienced significant volatility, failing to maintain its momentum among the Magnificent Seven.

Tesla’s struggles can be attributed to:

• Production Setbacks: Disappointing sales in Shanghai and production halt near Berlin due to sabotage have negatively impacted Tesla’s stock prices.
• Leadership Challenges: Elon Musk’s $55 billion pay package being struck down by a court order adds to the recent setbacks faced by Tesla, contributing to investor concerns.
• Tempered Outlook: Elon Musk’s vague outlook on January 24th provided few specifics, fueling uncertainty and contributing to a bearish sentiment towards Tesla stock.
• Analyst Downgrades: Wells Fargo downgraded Tesla to underweight with a lowered price target, citing concerns over unit volumes, diminishing impact of price cuts on demand, and challenges with the economics of the Model 2.
• Reduced Delivery Forecasts: UBS also reduced its Tesla stock price target and delivery forecasts for Q1 and the full year, reflecting lowered expectations for the company’s performance.
• Delayed Ramp-Up: Analysts at Everscore suggested that Tesla’s new cheaper vehicle may not ramp up until 2027, delaying potential growth and impacting investor sentiment.
• Profit Projections Slashed: Wall Street slashed 2024 profit projections after Tesla’s disappointing fourth-quarter earnings report, with analysts highlighting challenges outlined during the earnings call.
• Loss of Confidence: Wedbush Securities removed Tesla stock from its list of “best ideas” for 2024 following the earnings report, indicating a loss of confidence in the company’s prospects.

While Nvidia continues to capitalize on its technological leadership and diversified revenue streams, Tesla faces mounting pressure to overcome operational hurdles and sustain its growth momentum.

What’s Next: Nvidia’s continued focus on AI, gaming, and data center solutions could position it for sustained growth.

On the other hand, Tesla’s ability to address production challenges and capitalize on emerging opportunities in the EV market will be critical to its long-term success.

Read Next: ‘They Are Not All Magnificent’: Wall Street Veteran Points Out 2 Vulnerable Magnificent 7 Stocks

Image: Midjourney