The S&P 500 (^GSPC 0. 52%) has more than recovered its losses from earlier this year and is now up nearly 4. 4% year to date.
Many mega-cap -focused companies have posted sizable gains -- including "Magnificent Seven" members Meta Platforms (META 1. 04%), Microsoft (MSFT -0. 28%), and Nvidia (NVDA 1.
But investors may be souring on Tesla (TSLA -0. 67%), Apple (AAPL 0. 04%), and Alphabet (GOOG 2. 30%) (GOOGL 2. 70%) due, in part, to their apparent lack of artificial intelligence (AI) achievements.
Here's what's going wrong for these growth stocks, and whether they are buys now. Image source: Getty Images.
Unven AI plays A great divide has appeared through the Magnificent Seven between companies whose investment theses have been enhanced by AI and those whose theses have not.
Perhaps the simplest reason why Tesla, Apple, and Alphabet are underperforming their Magnificent Seven peers is that they are on the unfavorable side of this great divide. Data by YCharts.
Just a couple of months ago, Tesla was down around 45% in 2025. It has recovered a substantial amount of those losses despite plummeting vehicle deries.
Tesla stock popped after its robotaxi event showcased gress on self-driving cars.
Some investors have been waiting nearly a decade for this, so it's understandable that the stock reacted favorably to the event.
Given the weak results in Tesla's core, Tesla's investment thesis increasingly relies on longer-term bets on self-driving cars and robotics.
Tesla could benefit from AI one day, but it isn't monetizing it to a significant extent right now. Apple is in a similar boat. Its core is selling -focused consumer ducts and services.
Apple hasn't made meaningful AI imvements to its duct suite, but it has released a slew of new tools and a software interface that tout AI capabilities.
However, it remains to be seen if Apple will be a net beneficiary of AI. AI presents arguably the best opportunity in decades for competition to tap into Apple's dominant smartphone market.
Apple has grown increasingly dependent on sales outside the U. , but has been losing market in key China due to intense competition from companies Xiaomi, Huawei, and Vivo.
Tesla, Apple could benefit from AI in the near future. But so far, AI simply hasn't been a catalyst for the company in the same way it has for other mega-cap -focused companies.
Alphabet is much more of a mixed bag. AI growth is a boon for cloud computing, and Google Cloud is the No. 3 player in the space behind Amazon (AMZN 2. 66%) Web Services and Microsoft Azure.
Alphabet-owned YouTube can also benefit from AI, as it helps creators duce content and line suggested s and advertisements better targeted to individual users.
Google's self-driving car ject, Waymo, could also benefit from AI. Alphabet-owned generative AI model Gemini is a multimodal tool -- meaning it can work with text, audio, visuals, and even code.
Gemini got off to a rocky start, but now it's a major player in the chatbot space, along with OpenAI's ChatGPT, Anthropic's Claude, and other generative AI companies.
However, the elephant in the room is uncertainty how AI could affect Alphabet's cash cow, Google.
Integrating Gemini with Google, or simply changing Google from a web page ranking tool to an interactive information powerhouse, could be a simple and effective way for Alphabet to hold its own despite mounting competition.
But there's no denying that Google is facing its biggest challenge in decades from competitors' AI-powered offerings.
That uncertainty alone, despite all the other ways Alphabet benefits from AI, has led some investors to avoid and/or dump the stock.
The sell-off in Apple and Alphabet is overblown Buying Tesla, Apple, or Alphabet is a belief that these companies will be able to adapt in the age of AI -- even if they don't benefit drastically from it.
Tesla is arguably the highest-risk name given its lofty valuation (it has the highest price-to-earnings (P/E) ratio and highest forward P/E ratio of the Magnificent Seven).
But Apple and Alphabet both have more reasonable valuations (31. 2 P/E for Apple and just 18. 6 for Alphabet).
These companies also generate a ton of free cash flow and earnings that they can use to reinvest in the and return capital to holders through buybacks and dividends.
Additionally, Apple and Alphabet have substantially more cash, cash equivalents, and marketable securities on their balance sheets than long-term debt.
Apple's big duct launch this September could be just what the company needs to ve that it has the hardware and software to attract Wall Street's attention.
Alphabet investors should continue to monitor the performance of the company's services segment, which is led by Google.
So far, Google ad revenue has been incredibly strong despite increased adoption of ChatGPT and other competition.
Until that trend shifts, it's hard to get too pessimistic Alphabet, especially with potential upside from Gemini and Waymo.
Beaten-down Magnificent Seven stocks to buy now The beauty being an individual investor is that you don't have to agree with Wall Street sentiment and can take advantage of when great companies go on sale.
Short-term-minded investors may pass on Tesla, Apple, and Alphabet simply because they aren't ven AI plays, but all three stocks could still be worth buying and holding for long-term investors.
At this juncture, Apple and Alphabet present far more compelling risk and potential reward files than Tesla -- especially Alphabet, given its dirt-cheap valuation.
So Alphabet would be my top pick of these three underperformers, with Apple as a close second.
However, the best buy ultimately depends on your personal risk tolerance and the end you believe will thrive over the long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors.
Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
The Motley Fool recommends Xiaomi and recommends the ing options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.