Microsoft, Tesla Are the Worst Mag 7 Stocks, Analysts Say. Which Ones to Buy Instead.

As the tech sector continues to dominate the stock market, investors are keeping a close eye on the so-called "Magnificent Seven" (Mag 7) stocks. These seven tech giants—Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta (META), Nvidia (NVDA), Tesla (TSLA), and Apple (AAPL)—have been the talk of the town, but not all of them are performing equally well. In this article, we'll take a closer look at why Microsoft and Tesla are lagging behind and suggest some alternatives for investors looking to capitalize on the tech boom.

Microsoft: The AI Gamble

Microsoft has been investing heavily in artificial intelligence (AI) and cloud services, but the company's stock price has not reflected the same level of growth as some of its peers. In 2024, Microsoft's share price increased by only 12% compared to the S&P 500's 25% return. The company's capital expenditure surged 75% to $55.7 billion in the fiscal year ended June 2024, as it poured resources into AI initiatives like integrating ChatGPT into Bing and Microsoft Copilot. However, investors have been questioning whether and when these investments will pay off, and the competition from other tech giants like Google and Meta has been fierce.

Tesla: The EV Struggles

Tesla's stock price has also underperformed the S&P 500 and its own ambitious goals in 2024. The company has faced production delays, quality issues, and regulatory hurdles, which have all contributed to its stock price decline. Tesla's high valuation and lack of profitability have also raised concerns among investors. Despite these challenges, Tesla remains a significant player in the electric vehicle (EV) market, and its stock price has the potential to rebound as the company works to address its operational issues.

Alternatives to Microsoft and Tesla

For investors looking to buy into the tech sector but avoid the risks associated with Microsoft and Tesla, there are several alternatives within the Mag 7 stocks that are worth considering:

1. Amazon (AMZN): Amazon has been a consistent performer in the tech sector, with a strong focus on e-commerce, cloud services, and AI. The company's stock price has increased by 19% in 2024, and its revenue growth has been impressive. Amazon's diverse business model and strong market position make it an attractive alternative to Microsoft and Tesla.
2. Alphabet (GOOGL): Alphabet, the parent company of Google, has been a leader in the tech sector for many years. The company's stock price has increased by 15% in 2024, and its revenue growth has been steady. Alphabet's dominance in search, advertising, and cloud services, as well as its investments in AI and other emerging technologies, make it a strong alternative to Microsoft and Tesla.
3. Meta (META): Meta, formerly known as Facebook, has been facing challenges in the social media sector, but the company's investments in the metaverse and AI have the potential to drive future growth. Meta's stock price has increased by 18% in 2024, and its revenue growth has been solid. As the company continues to innovate and adapt to changing market conditions, it could be an attractive alternative to Microsoft and Tesla.

In conclusion, while Microsoft and Tesla have faced challenges in the tech sector, there are several alternatives within the Mag 7 stocks that investors can consider. Amazon, Alphabet, and Meta have all shown strong performance and have the potential to continue to grow in the coming years. As the tech sector continues to evolve, investors should stay informed about the latest developments and make strategic decisions based on the strengths and weaknesses of each company.