The S&P 500‘s up only 9.5% so far this year, compared to 25% in both 2023 and 2024. Some stocks, like Palantir and GE Aerospace, have been driving growth. But two household names are stumbling.
Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA) – often seen as poster children for innovation – are down nearly 10% each this year.
Apple: strong fundamentals, weaker sentiment
Apple remains one of the most recognisable brands on the planet. Yet its share price has slipped 7.9% this year. At first glance, this seems puzzling. At $408.6bn, it has the fourth-highest revenue in the US and while earnings growth’s been flat, the company’s hardly in crisis.
From a valuation standpoint, Apple trades on a forward price-to-earnings (P/E) ratio of 31. That’s not particularly demanding for a tech giant. In fact, value investors might see an opportunity here.
The firm also boasts the largest free cash flow on the S&P 500, at $96.2bn — more than both Microsoft and Nvidia. So why the drop?
Two key issues stand out. First, investors were underwhelmed by Apple’s latest artificial intelligence (AI) push. The new Siri improvements, while promising, fell short of the hype. Second, broader economic pressures – from tariff worries to softer consumer demand – are dampening sentiment. For now, Apple seems to be battling perception rather than performance.
But once it makes a more decisive move into AI, it’s likely to recover – making it an attractive stock to consider at this valuation.
Tesla: growth engine stalling?
Tesla’s always been a more volatile ride. It remains one of the largest carmakers globally and is the third-most traded stock on the S&P 500, with an average daily volume of 10.1m. Over the past five years, its share price is still up 130%, comfortably ahead of Apple.
But in 2025, it’s fallen 9.8%.
The fundamentals here are more worrying. Revenue’s down, and earnings growth’s plunged 51.5% year on year. Profitability’s modest, with a net margin of 6.5% and return on equity of 8.4%. Free cash flow stands at just $572m, with most operating cash funnelled into investments.
Valuation remains a sticking point. Tesla trades on a forward P/E ratio of 205 – eye-wateringly high. Meanwhile, weaker vehicle sales are ringing alarm bells. In China, weekly electric vehicle (EV) registrations have dropped almost 26%, with year-to-date figures down 12%.
Investors are beginning to question whether demand can keep pace with supply. Yes, it’s possible things could turn around if boss Elon Musk steadies the ship. But right now, I won’t consider the stock.
The lesson for investors
If nothing else, the struggles of Apple and Tesla highlight how fickle markets can be. Yesterday’s heroes can quickly turn into today’s laggards. The best safeguard, in my view, is diversification.
For investors keen on US tech, a FTSE 100 investment trust like Scottish Mortgage offers an intriguing option. The fund’s delivered a 29% gain in the past year, trades on a P/E ratio of 11.6, and maintains a return on equity of 9.9%.
It also spreads investments across technology, retail, finance, and emerging industries. However, it remains heavily exposed to US markets, meaning a major downturn would still bite.
Even so, it offers more protection than pinning hopes on a single share. As Apple and Tesla have shown, even the brightest stars can flicker.
