If you’re building a list of the most important stocks in the market, Tesla has to be on it. Or does it?

That’s part of a growing debate on Wall Street, where shares of Elon Musk’s electric-vehicle maker are tanking as the rest of the market rallies — and the company is warning that things may not get better for a while. An original member of the so-called Magnificent Seven tech stocks that have been driving the S&P 500 Index to new heights, traders are now wondering if Tesla’s name belongs next to those other powerhouses.

The storm clouds are gathering for Tesla.Credit: Reuters

After doubling last year, Tesla’s stock price is down 22 per cent to start 2024. Compare that to Nvidia Corp.‘s 46 per cent surge or Meta Platforms Inc.’s 32 per cent gain since the beginning of the year and it’s easy to see where the questions are coming from. Indeed, it’s by far the worst performer in the Magnificent Seven Index this year.

The problem for the EV-maker is six of those seven companies are benefiting from the enthusiasm surrounding burgeoning artificial intelligence technology. The group hit a record 29.5 per cent weighting in the S&P 500 last week even with Tesla’s decline, according to data compiled by Bloomberg. But despite Musk’s efforts to position his company as an AI investment, the reality is Tesla faces a unique set of challenges.

“Although Elon Musk would probably disagree, investors don’t see Tesla as an AI play like most of the other Magnificent Seven stocks,” said Matthew Maley, chief market strategist at Miller Tabak + Co.

“We have a much different backdrop for Tesla and the others in the Mag Seven — the demand trend for Tesla products is fading, while it’s exploding higher for those companies that are more associated with AI.”

At the heart of this divide is the dimming outlook for electric vehicles. Demand is expected to slow in 2024, and perhaps beyond, raising doubts about Tesla’s ability to grow at the rapid pace investors are accustomed to seeing.