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NVIDIA Tops, Tesla Flops Among Magnificent 7 in Q1: Here's Why
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After finishing 2023 on a high note, markets were off to a flying start in the first three months of 2024, with the S&P 500 posting its best first-quarter performance since 2019. The market’s rally was largely driven by rate-cut hopes and AI optimism (read more: Snub VIX's Climb, Focus on S&P 500's Striking Rise: 4 Picks).
However, unlike the broader markets, the magnificent seven stocks witnessed a significant divergence of returns in the first quarter of 2024. While Amazon.com, Inc. (AMZN - Free Report) , Google parent Alphabet Inc. (GOOGL - Free Report) , Microsoft Corporation (MSFT - Free Report) , Meta Platforms, Inc. (META - Free Report) and NVIDIA Corporation (NVDA - Free Report) saw their shares scale northward in the first three months of the year, Apple Inc. (AAPL - Free Report) and Tesla, Inc. (TSLA - Free Report) lamentably suffered double-digit declines.
Among the magnificent seven stocks, NVIDIA’s shares surged the most, spiking 82.5% in the first three months of 2024. NVIDIA being the worldwide leader in graphic processing units, or GPU, saw its stock skyrocket by 245% last year. Conversely, Tesla’s shares took a beating in the first quarter, with the electric vehicle manufacturers’ stock tanking 29.5% and creating a noteworthy shift in market dynamics.
Image Source: Zacks Investment Research
Let us, now, look at what exerted influence on NVIDIA and Tesla’s share prices –
NVIDIA Shines
NVIDIA became a Wall Street darling in the first quarter of 2024. The unquenchable demand for AI models among tech companies increased the requirement for NVIDIA’s chips. Quite a few tech firms are adopting generative AI, mostly in applications like ChatGPT.
NVIDIA’s stock hit an all-time high in February as Goldman Sachs raised its price target based on the AI boom and the chipmaker’s modernization capability.
Of late, NVIDIA’s data center business has done well, with its H100 graphic cards becoming the most sought-after commodity among AI developers in Silicon Valley. The data center business was able to overcome government restrictions on transferring AI semiconductors to China.
NVIDIA’s current valuation may look stretched but it has more upside left due to the spending frenzy on AI. Nvidia’s expected earnings growth rate for the current and next year is 84% and 14.1%, respectively. Its estimated revenue growth rate for the current and next year is 72.6% and 18.7%, respectively. The Zacks Consensus Estimate for Nvidia’s current-year earnings has increased 18.4% over the past 60 days.
NVIDIA’s shares have outperformed the Semiconductor - General industry in the year-to-date period (+71.9% vs. +54.1%). NVIDIA currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Image Source: Zacks Investment Research
Tesla in Doldrums
Tesla’s shares in recent times plunged from its 2021 all-time high as the automaker has been plagued by safety concerns, a slew of recalls, and a slowdown in growth. Manufacturing halt in Germany coupled with discouraging sales in China have adversely impacted Tesla’s share prices.
Leadership challenges have also become a nightmare for Tesla. While Elon Musk’s vague outlook on Tesla for this year added to the bearish sentiment on Wall Street, the rejection of his $55 billion pay package by the court added to investors’ apprehensions.
Several financial behemoths have been downgrading Tesla following unsatisfactory fourth-quarter earnings results. While Wells Fargo lowered Tesla’s ratings for this year amid concerns over unit volumes, UBS trimmed the company’s stock price target as they remained worried about a fall in demand for electric vehicles. Needless to say, Chinese rivals have begun to sell more electric vehicles than Tesla.
Tesla is facing a humongous task in managing operational bottlenecks, and its future for the time being looks bleak. The Zacks Consensus Estimate for its current-year earnings has decreased 12.1% over the past 60 days. TSLA’s earnings growth rate for the current year is estimated to decline by 9.3%.
Tesla’s shares have declined 28.5% so far this year against the Automotive - Domestic industry’s decline of 25.4%. Tesla’s stock for now is in a bear market. The company currently has a Zacks Rank #5 (Strong Sell).
Image Source: Zacks Investment Research
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NVIDIA Tops, Tesla Flops Among Magnificent 7 in Q1: Here's Why
After finishing 2023 on a high note, markets were off to a flying start in the first three months of 2024, with the S&P 500 posting its best first-quarter performance since 2019. The market’s rally was largely driven by rate-cut hopes and AI optimism (read more: Snub VIX's Climb, Focus on S&P 500's Striking Rise: 4 Picks).
However, unlike the broader markets, the magnificent seven stocks witnessed a significant divergence of returns in the first quarter of 2024. While Amazon.com, Inc. (AMZN - Free Report) , Google parent Alphabet Inc. (GOOGL - Free Report) , Microsoft Corporation (MSFT - Free Report) , Meta Platforms, Inc. (META - Free Report) and NVIDIA Corporation (NVDA - Free Report) saw their shares scale northward in the first three months of the year, Apple Inc. (AAPL - Free Report) and Tesla, Inc. (TSLA - Free Report) lamentably suffered double-digit declines.
Among the magnificent seven stocks, NVIDIA’s shares surged the most, spiking 82.5% in the first three months of 2024. NVIDIA being the worldwide leader in graphic processing units, or GPU, saw its stock skyrocket by 245% last year. Conversely, Tesla’s shares took a beating in the first quarter, with the electric vehicle manufacturers’ stock tanking 29.5% and creating a noteworthy shift in market dynamics.
Image Source: Zacks Investment Research
Let us, now, look at what exerted influence on NVIDIA and Tesla’s share prices –
NVIDIA Shines
NVIDIA became a Wall Street darling in the first quarter of 2024. The unquenchable demand for AI models among tech companies increased the requirement for NVIDIA’s chips. Quite a few tech firms are adopting generative AI, mostly in applications like ChatGPT.
NVIDIA’s stock hit an all-time high in February as Goldman Sachs raised its price target based on the AI boom and the chipmaker’s modernization capability.
Of late, NVIDIA’s data center business has done well, with its H100 graphic cards becoming the most sought-after commodity among AI developers in Silicon Valley. The data center business was able to overcome government restrictions on transferring AI semiconductors to China.
NVIDIA’s blockbuster fiscal fourth-quarter earnings results also boosted investors’ confidence and helped the stock scale upward (read more: Nvidia a Must-Buy After AI-Fueled Blowout Earnings).
NVIDIA’s current valuation may look stretched but it has more upside left due to the spending frenzy on AI. Nvidia’s expected earnings growth rate for the current and next year is 84% and 14.1%, respectively. Its estimated revenue growth rate for the current and next year is 72.6% and 18.7%, respectively. The Zacks Consensus Estimate for Nvidia’s current-year earnings has increased 18.4% over the past 60 days.
NVIDIA’s shares have outperformed the Semiconductor - General industry in the year-to-date period (+71.9% vs. +54.1%). NVIDIA currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Image Source: Zacks Investment Research
Tesla in Doldrums
Tesla’s shares in recent times plunged from its 2021 all-time high as the automaker has been plagued by safety concerns, a slew of recalls, and a slowdown in growth. Manufacturing halt in Germany coupled with discouraging sales in China have adversely impacted Tesla’s share prices.
Leadership challenges have also become a nightmare for Tesla. While Elon Musk’s vague outlook on Tesla for this year added to the bearish sentiment on Wall Street, the rejection of his $55 billion pay package by the court added to investors’ apprehensions.
Several financial behemoths have been downgrading Tesla following unsatisfactory fourth-quarter earnings results. While Wells Fargo lowered Tesla’s ratings for this year amid concerns over unit volumes, UBS trimmed the company’s stock price target as they remained worried about a fall in demand for electric vehicles. Needless to say, Chinese rivals have begun to sell more electric vehicles than Tesla.
Tesla is facing a humongous task in managing operational bottlenecks, and its future for the time being looks bleak. The Zacks Consensus Estimate for its current-year earnings has decreased 12.1% over the past 60 days. TSLA’s earnings growth rate for the current year is estimated to decline by 9.3%.
Tesla’s shares have declined 28.5% so far this year against the Automotive - Domestic industry’s decline of 25.4%. Tesla’s stock for now is in a bear market. The company currently has a Zacks Rank #5 (Strong Sell).
Image Source: Zacks Investment Research