Is Tesla's Continuing Struggle Gonna Turn The 'Mag 7' Into The 'Mag 6'?

Tesla's position in the Mag 7 is under threat.

Influenced by factors such as profit squeeze from price wars and lower-than-expected financial reports, Tesla's stock price has been falling continuously this year, with a cumulative decline of 24%.

On Thursday, Tesla shares even showed a death cross - the 50-day moving average fell below the 200-day moving average - some traders believe this signals the price will continue to decline.

It's Magnificent 6, said Brandon Michael, a senior investment analyst at ABC Funds.

Tesla has a lot of issues with competition from Chinese EV makers, price cuts, shrinking margins, and even Musk said himself that the Dojo supercomputer is a long shot.

More than a dozen traders told the media that the next passing the baton from Tesla is likely to be a company that has successfully monetized the booming trend of AI.

Multiple reports suggest high borrowing costs, reduced government subsidies, and continued price wars are also challenging Tesla.

As for the potential candidate to Take Over Tesla's place, US communication chip giant Broadcom is a popular option.

Benefiting from the continued fermentation of the AI concept, Broadcom's market value doubled in 2023 and made the top ten in the US for the first time. Some traders are betting that its upcoming acquisition of cloud computing company VMware could also boost its stock price.

Last year, Broadcom's impressive performance led Wall Street analysts to believe that Broadcom is likely the next company to benefit from AI Infrastructure demand after Nvidia.

If I were to put a seventh in there, it would be Broadcom, which is a leader in custom silicon and is facilitating the AI revolution, said Michael.

Another nominee is US chip behemoth AMD, a major competitor to Nvidia, whose share price more than doubled last year.

Latest financial reports showed that AMD's fourth-quarter revenue exceeded expectations but was due to weaker-than-expected earnings guidance for the first quarter, causing the company's share price to drop more than 6% after hours.

Chris Beauchamp, Chief Market Analyst at IG Group, reckons that although AMD's market value is far from Tesla's, it can stand out due to it being a major benefactor of the AI trend.

The more common view is that the Mag 7 of the U.S. stock market might be reduced to six members, turning into the Mag 6.

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