NASDAQ vs. TSLA: Compare with the Index
The Best of the Magnificent 7?
In the rapidly evolving landscape of technology investing, few stories are as compelling as Tesla’s meteoric rise and its complex relationship with the broader tech market. As we analyze Tesla’s performance through June 2025, a fascinating picture emerges of a company that continues to defy conventional wisdom while navigating an increasingly challenging environment for tech giants.
The Magnificent 7 in Transition
The “Magnificent Seven” – originally comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla – has undergone significant changes in 2025, with Broadcom jumping into the ranking while Tesla has notably dropped out. This shift reflects the dynamic nature of tech leadership and raises important questions about Tesla’s place in the modern investment landscape.
The broader Magnificent Seven has struggled in 2025, with six members tracking significant year-to-date losses led by Tesla’s 40% drop, while the group has fallen 2.51% compared to the other 493 S&P 500 stocks rising 5.32%. This underperformance marks a notable departure from the group’s dominance in previous years.
Tesla’s Remarkable Performance Against QQQ
Despite broader market challenges, our deep analysis reveals a more nuanced picture of Tesla’s long-term performance trajectory. The data presents a compelling case for Tesla’s exceptional growth story when viewed against the Invesco QQQ Trust (QQQ), which tracks the NASDAQ-100 index.
Short-Term Outperformance: A 76% Surge
Over the 12-month period ending June 17, 2025, Tesla delivered an extraordinary +76% return with an impressive Alpha of 55.90% against QQQ. This performance dramatically outpaced QQQ’s estimated 11.59% return, showcasing Tesla’s ability to generate substantial shareholder value even amid market turbulence.
The short-term metrics reveal both opportunity and risk:
- Sharpe Ratio of 1.07 indicates strong risk-adjusted returns
- Sortino Ratio of 1.88 demonstrates superior downside risk management
- Maximum drawdown of -53.77% highlights the volatility investors must stomach
- 73.96% volatility confirms Tesla’s high-risk, high-reward profile
Long-Term Dominance: A 398% Five-Year Journey
Tesla’s five-year performance tells an even more remarkable story. From June 2020 to June 2025, Tesla generated a staggering +398% return with a 19.39% Alpha, absolutely dwarfing QQQ’s approximately 17.06% annualized return.
Key long-term insights include:
- Sharpe Ratio of 0.75 showing solid risk-adjusted performance over time
- Sortino Ratio of 1.26 indicating effective downside protection
- Maximum drawdown of -73.63% revealing the extreme volatility journey
- 64.16% five-year volatility demonstrating persistent but profitable turbulence
The Diversification Surprise
One of the most intriguing findings from our analysis is Tesla’s correlation coefficient of 0.45 with QQQ. This surprisingly moderate correlation suggests that Tesla, despite being a prominent NASDAQ-100 component, offers meaningful diversification benefits within a tech-heavy portfolio. Recent analysis confirms this 3-month correlation between Tesla and QQQ stands at 0.49, reinforcing the diversification potential.
Market Dynamics and Beta Analysis
Tesla’s Beta of 2.05 (1-year) and 1.74 (5-year) reveals its amplified sensitivity to market movements. When tech markets rally, Tesla tends to soar; when they decline, Tesla often falls harder. This characteristic makes Tesla an ideal vehicle for investors with strong conviction about the technology sector’s direction but requires careful position sizing due to the inherent volatility.
The AI and Autonomy Catalyst
Tesla’s future valuation increasingly depends on its autonomous driving and AI-related initiatives, including its Optimus robot program, which could eventually contribute 90% of the company’s valuation, with management believing Optimus can generate over $10 trillion in revenue. According to CEO Elon Musk, Tesla plans to launch a fully autonomous taxi service in Austin, Texas in June 2025, and the company will build 10,000 humanoid robots this year.
These ambitious plans underscore why Tesla continues to command premium valuations despite traditional automotive industry metrics. The company is positioning itself not merely as an electric vehicle manufacturer but as a comprehensive AI and robotics platform.
Investment Implications: Risk vs. Reward
For Growth Investors
Tesla’s exceptional Alpha generation (55.90% over 1 year, 19.39% over 5 years) makes it a compelling choice for growth-focused portfolios. The company’s ability to consistently outperform the broader tech market, even during challenging periods, demonstrates its potential for continued value creation.
For Risk-Conscious Investors
The high volatility (73.96% annually) and severe drawdowns (up to -73.63%) require careful consideration. QQQ’s more moderate volatility and 30.60 P/E ratio as of April 2025 may appeal to investors seeking tech exposure with less individual company risk.
Portfolio Strategy Considerations
The moderate 0.45 correlation with QQQ suggests Tesla can enhance diversification within tech portfolios. However, the high Beta means Tesla amplifies both gains and losses, making position sizing crucial for risk management.
Comparative Performance Metrics
| Metric | TSLA 1-Year | TSLA 5-Year | QQQ (Estimated) |
|---|---|---|---|
| Total Return | +76% | +398% | ~11.59% (1Y) / ~17.06% (5Y annualized) |
| Alpha | 55.90% | 19.39% | - |
| Volatility | 73.96% | 64.16% | ~25.72% |
| Max Drawdown | -53.77% | -73.63% | ~-1.07% |
| Sharpe Ratio | 1.07 | 0.75 | ~0.45 |
| Beta | 2.05 | 1.74 | 1.00 |
| Correlation with QQQ | 0.45 | 0.45 | 1.00 |
The Magnificent 7 Evolution
The original Magnificent Seven climbed 75.71% during 2023, while the broader S&P 500 returned 24.23%, but 2025 has proven more challenging. Tesla’s exclusion from the current Magnificent Seven grouping doesn’t diminish its long-term growth potential but reflects the market’s current focus on more diversified AI plays and semiconductor companies.
Since January 1, 2008, the Nasdaq-100 has delivered a cumulative total return of 1,092%, more than double the 460% return of the S&P 500, with Invesco QQQ delivering a total return of 724% during the same period. Tesla’s performance has contributed significantly to this outperformance story.
Current Market Challenges
Tesla faces immediate headwinds, with shares falling 14% following escalating tensions between CEO Elon Musk and President Trump, dropping the company’s value by $152 billion in a single day. This volatility exemplifies the stock’s sensitivity to both market conditions and leadership dynamics.
As of June 13, 2025, Tesla’s stock price closed at $325.47, with a 52-week high of $488.54 and a 52-week low of $177.00, highlighting the extreme price swings investors must navigate.
The Road Ahead: Robotaxis and Beyond
Tesla is targeting June 22nd as the start of first public robotaxi rides, marking a potential inflection point for the company’s autonomous vehicle ambitions. The company’s autonomous driving and AI-related initiatives, which include its Optimus robot program, could eventually contribute 90% of the company’s valuation.
However, execution risks remain high. Tesla fundamentals are deteriorating at an ‘alarming rate,’ according to Guggenheim analysts, while Wells Fargo warns Tesla stock could crash 60% as Q2 deliveries disappoint.
Conclusion: Tesla’s Enduring Appeal
Despite recent volatility and its technical exclusion from the current Magnificent Seven, Tesla’s fundamental investment thesis remains compelling. The company’s extraordinary returns (76% over 1 year, 398% over 5 years) coupled with substantial Alpha generation (55.90% and 19.39% respectively) demonstrate its continued ability to create shareholder value.
The key considerations for investors include:
- Exceptional Growth Potential: Tesla’s Alpha generation significantly exceeds market benchmarks
- High Volatility Profile: Substantial drawdowns require strong risk tolerance
- Diversification Benefits: Moderate correlation with QQQ offers portfolio enhancement opportunities
- Future Catalyst Pipeline: AI, autonomy, and robotics initiatives provide multiple growth vectors
For investors willing to embrace volatility in pursuit of exceptional returns, Tesla continues to offer one of the most compelling risk-reward profiles in the technology sector. While it may no longer officially rank among the Magnificent Seven, Tesla’s performance metrics suggest it remains magnificent in its own right.
The question isn’t whether Tesla belongs among tech’s elite – the numbers speak for themselves. Rather, the question is whether investors can stomach the volatility required to capture Tesla’s exceptional long-term returns. For those who can, Tesla’s 398% five-year performance and 55.90% one-year Alpha suggest the rewards may well justify the ride.
Analysis based on data as of 01:27 PM EEST, June 17, 2025. Past performance does not guarantee future results. All investments carry risk of loss.
FAQ
How did Tesla perform against QQQ in the past year? +
Tesla achieved a remarkable +76% return over the past year compared to QQQ's estimated 11.59% return, generating an exceptional Alpha of 55.90%.
What are Tesla's five-year returns compared to QQQ? +
Over five years, Tesla delivered an extraordinary +398% return with a 19.39% Alpha, significantly outperforming QQQ's approximately 17.06% annualized return.
How correlated is Tesla with the NASDAQ-100? +
Tesla's correlation with QQQ is surprisingly moderate at 0.45, suggesting meaningful diversification benefits within tech portfolios despite being a NASDAQ-100 component.
What is Tesla's volatility and risk profile? +
Tesla exhibits high volatility with 73.96% over one year and 64.16% over five years, along with maximum drawdowns of -53.77% and -73.63% respectively.
What is Tesla's Beta compared to the market? +
Tesla's Beta of 2.05 (1-year) and 1.74 (5-year) indicates amplified sensitivity to market movements, meaning it tends to move more dramatically than the broader market.
How are Tesla's risk-adjusted returns? +
Tesla demonstrates strong risk-adjusted returns with Sharpe Ratios of 1.07 (1-year) and 0.75 (5-year), indicating good compensation for the risk taken.
Is Tesla still part of the Magnificent Seven? +
As of 2025, Tesla has been excluded from the current Magnificent Seven grouping, with Broadcom taking its place due to superior market performance and AI positioning.
Should I invest in Tesla for portfolio diversification? +
Tesla's exceptional Alpha generation (55.90% one-year, 19.39% five-year) and moderate correlation with QQQ (0.45) make it compelling for growth investors willing to accept high volatility.
What are the main risks of investing in Tesla? +
Tesla faces challenges from increasing EV competition, potential policy changes affecting subsidies, and execution risks around ambitious AI and robotics initiatives.
What are Tesla's key growth catalysts? +
Tesla's future catalysts include autonomous robotaxi services launching in Austin, Optimus humanoid robot production, Full Self-Driving software expansion, and AI/robotics monetization opportunities.
Is Tesla suitable for conservative investors? +
Tesla's high volatility (73.96% vs QQQ's ~25.72%) and severe drawdowns make it suitable primarily for risk-tolerant investors with strong conviction in the company's long-term vision.
How does Tesla compare to investing in QQQ directly? +
QQQ offers broader diversification across 100+ tech companies, lower volatility, and more stable returns, while Tesla provides higher growth potential but with significantly more risk.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing involves risks, including the possible loss of principal. Always conduct your own research before making investment decisions.
