Ranking the best Magnificent Seven stocks to buy in 2026. Here’s my No. 5

When you look at Magnificent Seven stocks, there is a clear outlier. Most of them are technology companies that are deeply involved in creating AI infrastructure, hardware or software that either make AI work better or provide unique services.

Then there is a car company, adze (NASDAQ:TSLA)which is the largest maker of electric vehicles and has led a wave of investor excitement to become the world’s largest automaker by market capitalization. Tesla currently has a market value of $1.6 trillion.

But Tesla had an interesting year as CEO Elon Musk watched car sales (and profits) decline. He became involved in domestic and global politics, and the company is still feeling the effects of this. Competition is fierce and it’s a tough time to be a car manufacturer.

However, Tesla is much more than just a car company. It has massive AI aspirations, and that’s why Tesla is my fifth Magnificent Seven stock to buy for 2026.

This is the third in a series of articles ranking the best stocks of the Magnificent Seven — the group of companies that collectively account for one-third of S&P 500and therefore have an outsized impact on the stock market. In previous articles, we discussed why Apple is number 7 on the list and Amazon took sixth place.

Here’s a closer look at Tesla and why it deserves the No. 5.

Tesla makes the most money selling electric vehicles. But the problem is that it doesn’t sell as many cars now as it did in previous years.

Yes, third quarter sales set company records for deliveries with 497,099 vehicles. But that was attributed to a $7,500 electric vehicle tax credit that expired on Sept. 30 — customers just sped up their purchases to beat the deadline.

Source: Tesla

This had a dramatic impact on Tesla’s revenues, which saw massive declines in the first two quarters of the year.

Source: Tesla

And to make matters worse, Tesla’s profit margins fell during the same period as competition from other automakers forced Tesla to lower its prices.

Source: Tesla

But competition is only part of the problem. Tesla faced a setback this year after Musk jumped wholeheartedly into politics, pouring millions of dollars into President Donald Trump’s successful campaign and appearing alongside him at several events. Musk spent the first months of Trump’s second term as a close confidante, leading the newly formed Department for Government Efficiency (DOGE), tasked with reducing the size of government.

DOGE was short-lived, as was Musk’s career in Washington, but the damage was done. Musk has publicly lamented that his role in the federal government has hurt his companies, including Tesla. A study by Yale University professors concluded that Musk’s political activities in the US cost Tesla more than 1 million vehicles sold.

I’ll admit, there’s a lot to be disappointed about Tesla, and that’s why the stock has been a disappointment for much of the year. But it’s also important to recognize that the company is building serious momentum, leading to a 13% spike in its share price over the past three months.

Because Tesla is developing its own AI product with its full self-driving (FSD) software, which some analysts believe will be a revolutionary change for the industry. Tesla’s recently updated software makes the Robotaxi app available for download on iOS in the US and Canada and is a significant step towards allowing Tesla users to one day monetize their Teslas by making them available as robotaxis when not in use.

Melius Research predicted that Tesla is approaching a tipping point in FSD software, where incremental progress will “roughly” give way to mass adoption of autonomous driving. When mass rollout with Tesla suddenly arrives on the roads as robotaxis, “it’s still going to shock most people,” analyst Rob Wertheimer wrote in a research note.

Musk said Tesla will be able to scale up production when that happens. “We have millions of cars that, with a software update, become full self-driving cars,” he told analysts. “You know, we’re making a few million a year. In fact, with the emergence of what we see now as clarity on getting full self-driving, full unsupervised self-driving, I would have to say, I feel confident in expanding Tesla production. That’s our intention to expand as quickly as we can future production.”

Tesla is still working on turning full autonomous driving into self-driving, but as Wertheimer writes, it’s making rapid progress and already has a fleet of millions of cars to flood the market.

And we haven’t even talked about Tesla’s other massive opportunity — the autonomous Tesla Optimus robot that Musk is trying to develop for use in homes and factories. Musk, as he negotiated a massive shareholder-approved pay raise this year, repeatedly referred to his “robotic army” as a potential source of tireless unpaid labor that can be trained to do almost anything. Part of Musk’s massive incentive plan at Tesla, which is valued at $1 trillion with stock options, depends on successfully building 1 million Optimus robots.

So there’s a lot going on with Tesla. Like I said, it’s not just a vehicle company. I don’t expect Tesla to significantly improve its margins in 2026, but I’ll be watching closely as the company continues its AI work. I think 2026 will be a good year for investors to start accumulating Tesla stock ahead of what could be a pivotal moment for Musk and his company.

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Patrick Sanders has no position in any of the listed stocks. The Motley Fool has positions in and recommends Amazon, Apple and Tesla. The Motley Fool has a disclosure policy.

Ranking the best Magnificent Seven stocks to buy in 2026. Here’s my No. 5 was originally published by The Motley Fool