I've Covered The "magnificent Seven" Stock…

1. Amazon

While miserable for most other businesses, the coronavirus pandemic was a perfect bullish storm for e-commerce giant Amazon. Not only was its online shopping platform already well established with proven capacity, but by the time ChatGPT’s November 2022 launch set off an artificial intelligence arms race, Amazon’s long-established — and market-leading — cloud computing business, Amazon Web Services, was also ready to meet exploding demand for remote machine-learning platforms.

An investment analyst sitting at a desk is reviewing a printed document.

Image source: Getty Images.

Nothing draws out competition opportunity, though, and the advent of AI is no exception. While Amazon Web Services is still the world’s leading cloud computing platform service provider at 28% (according to Synergy Research Group), it’s been steadily losing market to Alphabet and Microsoft since 2022’s 34% peak. While the cloud market itself is still growing briskly enough to support Amazon’s second-quarter cloud growth rate of 37%, the fact that it’s underperforming its top rivals suggests this business is vulnerable if and when the global artificial intelligence industry finally runs into a headwind.

Meanwhile, Amazon’s Q2 product sales growth of nearly 14% is impressive, but also a clear slowdown from recent growth rates. If only due to the sheer difficulty of adding to its already enormous size — numbers from Statista indicate it already handles 40% of online shopping in the United States — the company’s e-commerce arm’s highest-growth phase is almost certainly in the rearview mirror.

The fact that the market already sees and is pricing in this concern speaks volumes about Amazon’s waning magnificence, too. Specifically, AMZN s have lagged the S&P 500 (^GSPC +0.00%) for the past year, as well as for the past five years.

Amazon Stock Quote

NASDAQ: AMZN

Amazon

Premium Feature

Moneyball Superscore

91/100

Today’s Change

(-1.34%) $-3.47

Current Price

$254.98

Key Data Points

Market Cap

$2.8TMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.

Day’s Range

$253.78 – $259.00

52wk Range

$196.00 – $287.20

Volume

42M

Avg Vol

45.7M

Gross Margin

50.77%

Take the hint.

2. Microsoft

Software giant Microsoft was already in a bit of trouble before now. Although, most other technology stocks at the time, it rallied during the wind-down of the pandemic, it’s been hit-and-miss since 2024. Not only is the company’s flagship Windows operating system still losing out to consumers’ abandonment of personal computers in favor of smaller mobile devices, but data from Synergy Research Group indicates that the growth of Microsoft’s of the global cloud computing market has stagnated at 20%.

It’s not all bad, to be clear. I’ll remind you that Microsoft reported a record-breaking quarterly revenue (now annualized at $100 billion) for the three months ending in June, mostly thanks to 43% year-over-year growth from its artificial intelligence business operating under the umbrella of its cloud computing platform, Azure. The company also issued AI-related guidance calling for growth of around 45% for the quarter ending this month. All of it has contributed to the stock’s bounce since late July.

Microsoft Stock Quote

NASDAQ: MSFT

Microsoft

Premium Feature

Moneyball Superscore

93/100

Today’s Change

(-0.72%) $-3.61

Current Price

$498.00

Key Data Points

Market Cap

$3.7TMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.

Day’s Range

$493.65 – $508.50

52wk Range

$349.20 – $553.72

Volume

21.7M

Avg Vol

33.6M

Gross Margin

67.94%

Dividend Yield

0.73%

Just recognize that the vast majority of this bullishness and the expected growth driving it is based on bold assumptions that its cloud computing backlog (remaining performance obligations) of $678 billion is rooted in artificial intelligence demand that may or may not come through as expected. It’s also rooted in the assumption that Microsoft will be able to meet these obligations profitably, which is anything but guaranteed, given the current price of memory chips, not to mention the rising cost of the electricity needed to power its data centers. Never even mind the fact that — according to numbers from Statcounter — Microsoft’s AI assistant, Copilot, is losing market to ChatGPT and Google’s Gemini.

Connect the dots. Microsoft’s hold on many of its core profit centers is tenuous.

3. Tesla

Last but not least, having made no net progress since late 2021, I would argue that s of electric vehicle maker Tesla are no longer deserving of their spot on the Magnificent Seven’s roster.

Tesla Stock Quote

NASDAQ: TSLA

Tesla

Premium Feature

Moneyball Superscore

65/100

Today’s Change

(0.96%) $3.60

Current Price

$378.90

Key Data Points

Market Cap

$1.5TMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.

Day’s Range

$372.88 – $380.42

52wk Range

$297.38 – $498.83

Volume

28.2M

Avg Vol

39.5M

Gross Margin

18.85%

It’s probably one of the market’s more surprising major stumbles of late. Not only did Tesla prove that the EV business it would end up leading for a while could be profitable, but, coming out of the COVID-19 pandemic, it also appeared that electric vehicles would become mainstream. As of 2023, the International Energy Agency was predicting that 35% of worldwide automobile sales would be electric vehicles by 2030, and that number has edged a bit higher in the meantime.

As it turns out, however, it’s not a business that Tesla is going to dominate after all. Although it’s still leading the lackluster U.S. electric vehicle market, overseas, it’s been lapped by China’s BYD, which delivered 557,090 battery-electric vehicles in Q2 versus Tesla’s 480,126. BYD is doing particularly well in Europe, too, where neither company has a home-field advantage. Indeed, every car that BYD currently sells in Europe is manufactured in China, and shipped using one of its eight owned car-carrying, ocean-faring boats (with 10 more on the way). It’s an important perspective simply because much of TSLA stock’s premium valuation has hinged on the company’s continued dominance of the electric vehicle market.

But Tesla’s moving into the AI-empowered humanoid robotics space, which CEO and founder Elon Musk says could be the “biggest product of all time.”

It’s an interesting direction to be sure. Just don’t lose perspective on the opportunity, or forget that Musk has something of a penchant for overstating the scope of opportunities, or how quickly Tesla can turn them into tangible revenue. An outlook from Barclays suggests the humanoid robot market is only going to be worth about $200 billion by 2035, and even Musk himself concedes that China’s working on lots of compelling competing alternatives.

With Tesla facing so much uncertainty now and for the foreseeable future, I understand why most investors are steering clear.