Which Underperforming "Magnificent Seven" Stock Is the Better Buy in 2026: Tesla or Microsoft?

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The stock market has been off to a shaky start to 2026. The S&P 500 is up less than 1% entering trading Tuesday, but for much of the year it’s been in negative territory. Many top growth stocks have been performing even worse, as investors have moved away from high-priced stocks that may be vulnerable to declines.

Even the illustrious “Magnificent Seven” stocks haven’t been raging buys this year. The two worst-performing stocks in that group at this stage of the year are Microsoft (NASDAQ: MSFT) and Tesla (NASDAQ: TSLA). They’re both down more than 20% thus far, and are facing very different challenges. Which of these stocks is the better buy right now?

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Microsoft’s stock is off to one of its worst starts in years. I’m not surprised there has been a bit of a correction simply because the tech stock was highly valued entering the year and trading at a sizable premium. But for it to be one of the worst performers in the Magnificent Seven is definitely a little surprising.

The business itself remains solid, with Microsoft generating 17% revenue growth in its most recent quarter (which ended on Jan. 28). The company has been investing in artificial intelligence (AI), and CEO Satya Nadella says that the company’s AI business is already “larger than some of our biggest franchises.” Investors may simply have been investing a bit more in growth if that were the case, particularly in its cloud business, Azure, which has been experiencing a slowdown in growth. Even though it hasn’t been a massive slowdown for Azure, the problem with a stock that’s trading at a high valuation is that expectations can be high and difficult to meet.

However, with strong fundamentals and promising opportunities related to AI, Microsoft’s stock remains one of the best blue chip stocks to own. And right now, with the stock trading at 24 times its trailing earnings, which is in line with the average S&P 500 stock, it could be a great time to load up on a potential long-term bargain.

Shares of electric vehicle (EV) maker Tesla have been in a tailspin this year as uncertainty about its long-term growth has weighed on its valuation. Competition has been ramping up and squeezing its margins, resulting in some disappointing numbers. Last year, Tesla’s net income was $3.8 billion — down from $7.1 billion a year earlier.

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