When you look at the seven largest stocks, you’ll notice a clear outlier. Most of them are direct technology companies, deeply involved in creating AI infrastructure, hardware, or software that makes AI work better or provide unique services.
There is also a car company, Tesla (NASDAQ: TSLA)which is the leading electric vehicle maker and has become the world’s largest automaker by market capitalization, fueled by investor enthusiasm. Tesla’s current market value is $1.6 trillion.
But Tesla has had an interesting year, with CEO Elon Musk seeing car sales (and profits) decline. He became involved in domestic and global politics, and the company is still feeling the impact. Competition is fierce and it’s a challenging time for automakers.
However, Tesla is more than just a car company. It has huge AI ambitions on its own, which is why Tesla is the fifth-highest number on my “seven” stocks to buy in 2026.
This is the third in a series of articles ranking the seven best stocks, which together represent one-third of the equity weighting. S&P 500 Indexthus having a huge impact on the stock market. In a previous article I discussed why apple is seventh on the list, and Amazon Achieved sixth place.
Here’s a closer look at Tesla and why it deserves the No. 5 spot.
Tesla generates most of its revenue from selling electric vehicles. But the problem is, it’s not selling as many cars now as it was in previous years.
Yes, third-quarter sales set a company record with 497,099 vehicles delivered. But that’s because the $7,500 electric vehicle tax credit expired on Sept. 30 — customers are simply speeding up their purchases to beat the deadline.
|
Metric |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|
|
car delivery |
336,681 |
384,112 |
497,099 |
|
Year-on-year change |
(13%) |
(13%) |
7% |
Source: Tesla
This has had a huge impact on Tesla’s revenue numbers, which have fallen significantly in the first two quarters of the year.
|
Metric |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|
|
car income |
US$17.38 billion |
US$19.88 billion |
US$20.02 billion |
|
Year-on-year change |
(20%) |
(16%) |
6% |
|
total revenue |
$21.3 billion |
$25.5 billion |
US$25.18 billion |
|
Year-on-year change |
(9%) |
(12%) |
12% |
Source: Tesla
To make matters worse, Tesla’s profit margins fell over the same period as competition from other automakers forced Tesla to lower prices.
|
Metric |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|
|
operating profit margin |
2.1% |
4.1% |
5.8% |
|
Year-on-year change |
(343bp) |
(219bp) |
(501bp) |
Source: Tesla
But competition is only part of the problem. Tesla has faced a serious blow this year as Musk has immersed himself in politics, pouring millions into President Donald Trump’s successful campaign and appearing with him at multiple events. Musk served as a confidant of Trump’s during the first months of his second term, running the newly created Department of Government Effectiveness (DOGE), whose mission was to reduce the size of government.
DOGE’s tenure was short, as was Musk’s career in Washington, but the damage was done. Musk has publicly lamented that his federal role has hurt his companies, including Tesla. A study by a Yale University professor concluded that Musk’s political activities in the United States cost Tesla more than 1 million vehicle sales.
I’ll admit, there’s a lot to unpack about Tesla, which is why the stock has disappointed for much of the year. But it’s also important to acknowledge that the company is building some strong momentum, leading to a massive 13% share price rise over the past three months.
Because Tesla is developing its own artificial intelligence products and its Full Self-Driving (FSD) software, some analysts believe this will be a revolutionary change for the industry. Tesla’s newly updated software makes its Robotaxi app available for download on iOS in the United States and Canada, a major step toward the goal of allowing Tesla owners to one day monetize their Teslas by using them as robotaxis when not in use.
Melius Research predicts that Tesla is approaching a tipping point with its FSD software, where incremental progress will “suddenly” give way to mass adoption of autonomous driving. When Tesla bursts onto the road as a robotaxi, “it will still come as a shock to most people,” analyst Rob Wertheimer wrote in a research note.
Musk said Tesla will be able to expand production by then. “We have millions of cars that, with a software update, can become fully self-driving,” he told analysts. “You know, we’re making millions of dollars a year. In fact, with the clarity that we’re seeing now on getting to full self-driving, unsupervised, full self-driving, I should say that I feel very confident about scaling Tesla’s production. That’s our intention to expand production as quickly as possible in the future.”
Tesla is still working on transitioning from full self-driving to self-driving, but as Wertheimer writes, it’s making rapid progress and already has millions of cars ready to flood the market.
We haven’t even talked about Tesla’s other huge opportunity – Musk is trying to develop the Tesla Optimus Prime autonomous robot for homes and factories. As he negotiated massive shareholder-approved pay raises this year, Musk repeatedly mentioned his “robot army” as a potential source of tireless unpaid labor that could be trained to do almost anything. Part of Musk’s massive incentive package at Tesla, which includes stock options worth up to $1 trillion, hinges on his success in building a million Optimus Prime robots.
So, there’s a lot going on at Tesla. Like I said, it’s not just a car company. I don’t expect Tesla’s margins to improve significantly in 2026, but I’ll be watching closely as the company continues its AI efforts. I believe 2026 will be a good year for investors to start accumulating Tesla stock, and it could be a seminal moment for Musk and his company.
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Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon, Apple, and Tesla. The Motley Fool has a disclosure policy.
The “Seven Best” Stocks to Buy in 2026, Ranked. This Is My 5th Stock Originally Posted by The Motley Fool