It may not be the news that Tesla (NASDAQ:TSLA) CEO Elon Musk wants to hear, but Interactive Brokers Chief Strategist Steve Sosnick believes semiconductor and infrastructure specialist Broadcom (NASDAQ:AVGO) should replace TSLA on the list of so-called “Magnificent Seven” stocks. Earlier today, Sosnick placed great emphasis on the ability to leverage artificial intelligence (AI) as a compelling argument for Broadcom stock.
“Broadcom captures the whole zeitgeist of the moment right now […] It’s an AI stock much more so. Even though Tesla might be one in the future, Broadcom is one now,” Sosnick said in an interview with CNBC.
This take clashes with Musk’s comments from earlier this year about how the electric vehicle (EV) manufacturer should be viewed. Back in April, Musk called Tesla “an AI/robotics and sustainable energy company.” The CEO later echoed this sentiment during the EV maker’s first-quarter earnings call.
However, it’s Broadcom stock that’s on the rise in 2024, gaining 68% so far this year while delivering stronger-than-expected earnings. In contrast, TSLA stock is down 24% year-to-date (YTD) amid disappointing financial results. With that in mind, a reframing of the Magnificent Seven stocks isn’t out of the question.
Contrasting Picture Supports Broadcom Stock and Its Promotion to the Magnificent 7
Fundamentally, what’s driving the case for Broadcom stock is industry demand for high-capacity chips. Notably, Broadcom CEO Hock Tan told investors during the company’s earnings call that the firm has witnessed “hyperscale customers” boost their orders in a bid to undergird their AI suites.
On the other hand, Tesla is struggling to justify its inclusion n the Magnificent Seven lately. To Sosnick’s point, while the company may eventually become an AI powerhouse, the market currently views Tesla as an EV firm first and foremost. And right now, consumers are gravitating toward hybrid vehicles over EVs.
In other words, Broadcom stock is gaining more relevance while TSLA, if not outright losing it, appears desperate to hold its position as the firm wrestles with consumer behavioral shifts and intense competition.
Perhaps the best reflection of this dichotomy is that Tesla started an EV sector price war. On the other hand, with demand soaring, Broadcom needs to do no such thing.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
