• Magnificent 7 propel US indices to record highs

• Apple diverges due to lack of AI initiatives

• Tesla also suffers from weakness in Chinese market

 

AI leads the way

The so-called Magnificent Seven group comprised of Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla has been the driving force behind the consecutive all-time highs observed in the major US equity indices. The tech behemoths have largely benefited from the Artificial Intelligence (AI) mania, with the latest earnings season providing clear evidence of solid growth in their fundamentals.

Although the Magnificent 7 stocks belong in the broader tech sector, they do not move in a straight line due to their diverse business nature. This phenomenon has been more than evident lately due to the relative underperformance of those lacking AI prospects. For that reason, Apple and Tesla have been the black sheep in 2024, lagging not only against the rest of the Magnificent 7 clan, but also against the major US stock indices.

Apple stock drops to 4-month low

Apple’s shares have been on the retreat since the beginning of the year as the firm is struggling to persuade investors for its progress in the AI spectrum. Lately, its decision to abandon its electric car manufacturing plans and shift those resources to AI initiatives has failed to impress markets. Moreover, sales of iPhone in China declined 24% in the first six weeks of 2024 compared to a year ago as the US-China tech war has shifted local demand towards domestic companies such as Huawei and Xiaomi. Besides that, Apple was fined 2$ billion from EU regulators for restricting Spotify from informing its clients for a cheaper subscription outside the Apple store.

From a technical perspective, Apple’s stock fell to its lowest since October 31, with the price opening with a significant negative gap on Tuesday. Should the decline resume, the October 2023 low of $165.70 might come under examination, where a violation of which could lead to a fresh 10-month bottom.

On the flipside, bullish pressures could propel the price towards the 180.00 psychological mark, which held its ground multiple times in early 2024. It is important for the bulls to reclaim this region as the latest decline accelerated following the break below it.

Tesla suffers from China woes

Tesla has been the worst performer among the Magnificent 7 stocks in 2024 as its latest delivery figures have failed to meet expectations, while future forecasts are getting revised lower. The leading electric car manufacturer’s stock dropped to a multi-month low after data from its Chinese factory for February showed a 16% drop in shipments on a monthly basis, with the absolute number being the lowest since December 2022.

For now, price cuts and self-driving technology prospects have failed to stop the price rout, which seems to be amplified by the firm’s lack of AI exposure. Despite all this pessimism, Tesla’s stock is currently trading at 54.5 times its 12-month forward earnings. Given the massive premium against major US indices, there seems to be significant room to the downside, if financial figures keep disappointing.