5 tech stocks that look cheap after the selloff

The perception of getting “more for less” can be appealing. But that’s not what we look for in a ‘cheap stock’ here at The Motley Fool.

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Value investors often seeking undervalued (or ‘cheap’) stocks that trade below their intrinsic values. Their analysis ought to lead them to believe the shares will eventually realise their true worth, leading to significant returns.

The technology sector has been volatile globally across the last few months. So has there been — or does there continue to be — an opportunity to consider buying undervalued stocks in quality businesses? Let’s find out…

Advanced Micro Devices

What it does: AMD designs high-performance processors and graphics cards, competing with Nvidia in PCs, servers, and gaming.

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Created with Highcharts 11.4.3Advanced Micro Devices PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

By James Fox. Advanced Micro Devices (NASDAQ:AMD) stock has pulled back from peaks.

It’s still expensive on near-term metrics, trading at 44,6 times forward earnings, but growth-adjusted metrics have become much more attractive – the price-to-earnings-to-growth ratio is 1.06, representing a 41.6% sector discount.

The big growth opportunity is in the artificial intelligence (AI) and data centre segment, where it currently plays a very distant second fiddle to Nvidia. 

To date, it has followed a different approach to Nvidia, focusing on the development of high-performance chipsets rather than a ‘full stack’ offering (hardware plus software). 

However, there are several reasons to think AMD might claim more market share. The Santa Clara firm claims supremacy in AI inferencing and recent acquisitions may aid its software offering. 

Moreover, Nvidia is experiencing some delays with next-generation Blackwell chips and this may present a window of opportunity for competitors. 

However, it would be remiss of me not to highlight that this is a fast-moving sector. Failure to keep up with Nvidia or ahead of Intel could be disastrous for those all-important growth forecasts.

James Fox owns shares in Advanced Micro Devices

Alphabet

What it does: Alphabet is a conglomerate with a vast tech empire. It owns Google, YouTube, Android, DeepMind, Fitbit, and more.

Created with Highcharts 11.4.3Alphabet PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

By Charlie CarmanAlphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) comfortably beat Wall Street estimates in its second-quarter earnings.

A 14% rise in revenue to $84.7bn exceeded the consensus forecast of $84.2bn. Earnings per share of $1.89 also eclipsed expectations of $1.84.

Despite these stellar numbers, Alphabet’s share price has declined recently. There are three key reasons investors could consider today an attractive entry point.

First, despite initial fears, AI-powered large language models like ChatGPT have barely dented Google’s dominance in internet search.

Second, the cloud computing division has strong momentum. Quarterly revenues climbed 29%, crossing the $10bn mark for the first time.

Third, the company’s forward price-to-earnings (P/E) ratio of 18.1 is the lowest among the ‘Magnificent Seven’. On this metric, the stock looks cheap.

Granted, ongoing antitrust litigation creates uncertainty for the investment outlook, posing risks to share price growth. But, as Warren Buffett once said, it can be wise to be greedy when others are fearful.

Charlie Carman owns shares in Alphabet. 

Alphabet 

What it does: The owner of Google and YouTube, Alphabet is one of the world’s largest technology companies. 

Created with Highcharts 11.4.3Alphabet PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

By Edward Sheldon, CFAAlphabet (NASDAQ: GOOG) (NASDAQ:GOOGL) shares have been hit hard in the recent tech sell-off. As I write this, they’re more than 20% off their 2024 highs. 

After this fall, I think the Big Tech stock is offering quite a bit of value. Currently, the forward-looking price-to-earnings (P/E) ratio (using the 2025 earnings per share forecast) is just 17. 

That strikes me as low for this technology company. After all, this is a business with a great track record and plenty of future growth potential. 

Now, it’s worth noting that there is some uncertainty with this stock. One issue is that new generative AI applications (such as ChatGPT) are a threat to its search revenues. 

Another is that regulators are targeting the company due to its dominance. Recently, the US Department of Justice has been taking aim at Google for operating a monopoly in digital advertising. 

All things considered, however, I believe the shares are too cheap. At current prices, I’m tempted to add to my position. 

Edward Sheldon owns shares in Alphabet 

NCC Group

What it does: NCC Group provides cybersecurity services, including digital protection and risk management.

Created with Highcharts 11.4.3NCC PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

By Royston Wild. Cyber security specialist NCC Group (LSE:NCC) was already looking cheap before the recent market reversal. Today I think it could be considered a bona-fide bargain.

City analysts think annual earnings here will surge 120% this financial year (to May 2025). Consequently, NCC’s shares trade on a corresponding price-to-earnings (P/E) ratio of 19.6 times.

That’s pretty attractive compared to the super valuations on many US and UK tech stocks. But this is not all.

The FTSE 250 company deals on a prospective price-to-earnings growth (PEG) multiple of 0.2. Any reading below one implies that a stock is undervalued.

Sales disappointed last year as tough economic conditions hit business spending. Things could remain difficult for NCC, too, if the US slumps into recession.

However, a recent sales recovery is a positive omen looking ahead, with constant currency sales at Cyber Security increasing 6% between November and May. 

I think profits here could rocket over the long term as the problem of cyber warfare steadily grows, and that buying in today could prove a shrewd move.

Royston Wild does not own shares in NCC Group.

ZScaler

What it does: Develops and provides network services and cybersecurity tools for businesses globally.

By Mark David Hartley. ZScaler (NASDAQ: ZS) collapsed 22% within the first week of September as the US tech industry underwent a heavy period of selling. Unlike competitor Fortinet, it was hit hard by the selloff. The crash wiped out all of the past year’s gains, bringing it back to October 2023 prices. In total, it’s down over 50% from its all-time high, giving it a lot of room to grow if the economy recovers.

Despite the volatility, the company is popular among investors. But high expenses have left it unprofitable for several years. And despite revenue of $2.17bn, the shares are still worth 12 times its revenue per share. Usually, that would mean the $170 price is very high. Yet still, analysts forecast an average 12-month price target of $215, up 25% from the current price. That would bring it closer to the price it was trading at in March this year.

Mark David Hartley owns shares in ZScaler and Fortinet. 

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Advanced Micro Devices, Alphabet, Fortinet, and Zscaler. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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