Value is in the eye of the beholder, and some people are still loading up on overvalued tech stocks that face challenging headwinds.
Despite the seemingly low odds of meaningful long-term growth, older investors are still piling into these big-name stocks. They usually gravitate toward household names that have been around for decades, but that doesn't ensure positive long-term returns. While you never know what can happen in the stock market, some stocks have a lower probability of success than others, including these picks.
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Tesla's EV business is losing ground
Tesla (TSLA 2.50%) makes most of its money from selling EVs, which is a declining business. The company still has a $1 trillion market cap because Elon Musk is the CEO, and it is working on a pivot to physical artificial intelligence (AI). Musk's business acumen, Tesla's innovation, and the fact that it's been lumped with household tech companies through the "Magnificent Seven" moniker are some of the reasons baby boomers may gravitate toward Tesla.
NASDAQ: TSLA
Key Data Points
The bullish scenario is that Tesla's Cybercabs become a high-margin ride-hailing service, and Optimus robots are in most households. That can happen, but there aren't any meaningful, tangible sales results for that part of the business. There needs to be more than hype to justify a $1 trillion market cap.
Tesla vehicle sales accounted for 77% of total results, and that part of the business was down 11% year over year. The expiration of EV tax credits, Musk's waning popularity among liberal-leaning customers, and intense EV competition in China are three major headwinds that can push the stock lower.
SpaceX and xAI are separate entities from Tesla. Justifying the valuation comes down to how well Optimus robots and Cybercabs perform, but it's not like Tesla is the only company competing for these opportunities. The opportunity is exciting, but a 204 forward P/E ratio should concern investors.
Intel still faces a long road ahead
Intel (INTC 5.13%) is a speculative turnaround story, but it's also a legacy blue chip tech company that has an appeal with boomers. The U.S. government recently took a 10% stake in the company, suggesting it will receive plenty of capital to help it catch up in the AI race. It doesn't hurt to get government support, and that's the main reason Intel stock has almost doubled since mid-September.
NASDAQ: INTC
Key Data Points
However, government backing does not guarantee a transformation, even for a company that has become a household name for many boomers. Even if Intel brings more manufacturing back to the U.S., the stock could stay flat or even recede to where it was before the government's 10% stake was announced.
Intel told investors when announcing the news that it had invested $108 billion in capital and $79 billion in research and development over the past five years to "[expand] U.S.-based manufacturing capacity and process technology."
The government's 10% stake is a small percentage compared to the amount of money Intel has already invested. For all of those investments, Intel ended up with a stock that has dropped by more than 25% over that five-year stretch.
Revenue growth has come to a crawl in recent quarters, with some quarters featuring year-over-year revenue declines. It's a bit too early to call Intel a winner, and that may warrant a correction later.
