2 Beaten-Down Tech Stocks to Watch in June

Super Micro Computer (SMCI) has recovered from accounting irregularity concerns that led to a stock decline and auditor resignation, regaining Nasdaq compliance after filing delayed reports; focus now shifts to its fundamentals in the AI hardware sector, despite a recent revenue miss. Alphabet (GOOGL, GOOG) faces potential antitrust regulation, including a possible forced divestiture of its Chrome browser, and rising competition from generative AI, but its valuation already reflects some of these concerns, with a low P/E ratio relative to its growth and dominant position in search.

Analysis

Super Micro Computer (SMCI) has recently navigated severe operational headwinds, including a 65% stock depreciation from its $119 peak in early 2024, stemming from accusations of accounting irregularities that prompted an auditor resignation and delayed financial reporting, risking a Nasdaq delisting. The company successfully regained Nasdaq compliance on February 26 by filing its overdue fiscal 2024 and 2025 reports, with an independent review finding no evidence of managerial fraud, though it recommended improvements to internal controls. This resolution allows investor focus to shift towards SMCI's fundamental position in the burgeoning AI hardware sector, where it assembles GPUs from partners like Nvidia and Advanced Micro Devices into servers, with potential demand uplift from Nvidia's Blackwell chip rollout. Despite these prospects, SMCI reported third-quarter revenue of $4.6 billion, falling short of the $5.42 billion analyst consensus, yet this figure still reflects a notable 19% year-over-year growth; the company currently trades at a forward price-to-earnings multiple of 14, significantly below the S&P 500 average of 24.

Alphabet (GOOGL, GOOG) is also contending with investor apprehension, primarily due to the escalating risk of antitrust regulation and the competitive encroachment of generative AI. A federal court has already ruled Google's search operations an illegal monopoly, and the Justice Department is advocating for the divestiture of its Chrome browser to mitigate perceived anti-competitive advantages in online search and advertising. While Google has not indicated plans to sell Chrome, this regulatory overhang, coupled with the threat from AI applications like ChatGPT potentially diverting user attention from traditional search, presents considerable uncertainty. Nevertheless, Alphabet's current valuation, marked by a forward P/E ratio of 18—a discount to the Nasdaq-100 average of 27—appears to factor in these challenges, particularly when juxtaposed with its robust 46% profit growth in the first quarter. The company's extensive economic moat, centered on its ubiquitous Google search engine, is a significant asset, though its resilience will be tested by these regulatory and technological shifts; integrating AI into its existing search platforms is a key strategic response.

Key Decisions for Investors

• For Super Micro Computer, the resolution of accounting and Nasdaq compliance issues shifts focus to its AI hardware growth potential; investors should monitor revenue performance against expectations, considering its attractive valuation relative to growth, given the recent miss.
• Investors in Alphabet must evaluate if the current discounted P/E adequately compensates for significant antitrust risks, including potential Chrome divestiture, and the competitive impact of generative AI, despite strong Q1 profit growth and its dominant search market position.
• Given Alphabet's exclusion from a cited 'top 10 stocks' list despite its strengths, investors should critically assess its position within a diversified tech portfolio against other opportunities that may offer a more favorable risk-reward profile in the current environment.