Even though the S&P 500 has recovered most of its losses in 2025, this has been a challenging year for some stocks as they grapple with regulatory challenges and economic uncertainty. Let's explore the pros and cons for Super Micro Computer (SMCI -1.98%) and Alphabet (GOOGL -0.27%) (GOOG -0.21%).
Super Micro Computer
Down 65% from an all-time high of $119 reached in early 2024, Super Micro Computer's stock crash predates Trump's trade war. Last year, the company was hit by a short-seller report accusing it of accounting irregularities. This crisis led to the resignation of Ernst & Young as its auditor and a delay in the submission of its required financial reports, putting the company's shares at risk of being delisted by the Nasdaq exchange. The good news is that these issues appear to be resolved.
On Feb. 26, Super Micro Computer regained compliance with Nasdaq requirements after filing delayed reports for fiscal 2024 and 2025. This move follows the completion of an independent committee review, which recommended some improvements to its internal controls but found no evidence of managerial fraud or misconduct. Now that this uncertainty appears to be resolved, investors can focus on Super Micro Computer's exciting fundamentals.
Super Micro turns graphics processing units (GPUs) made by partners like Nvidia and Advanced Micro Devices into user-ready computer servers. And so far, the AI hardware industry shows no signs of slowing down as companies push to stay competitive in this rapidly evolving industry. The continued rollout of Nvidia's popular Blackwell AI chips could help turbocharge demand for the remainder of 2025 and possibly beyond.
That said, the company is not without challenges. Third quarter revenue of $4.6 billion came in short of analysts' expectation of $5.42 billion, but investors should look at this in the proper context. That figure still represents a year-over-year growth rate of around 19%, which isn't too shabby for a company valued at a forward price to earnings (P/E) multiple of just 14 compared to the S&P 500 average of 24.
Alphabet
Like Super Micro Computer, Alphabet's decline is about more than the recent trade war-related uncertainty. Investors have become increasingly skeptical about the company's future due to the rising likelihood of antitrust regulation, which could lead to the breakup of certain aspects of its business. With that said, investors may be overreacting to the situation.
Last year, a federal judge ruled that Google held an illegal monopoly in the search industry. In response, the Justice Department wants to force Google to divest its Chrome browser, arguing that the platform gives Google monopoly power over online search and advertising by allowing it to steer a massive amount of internet traffic to its search engine.
While Google currently has no plans to sell Chrome, investors should consider the possibility that this or similar outcomes could be imposed on it.
Another big threat could come from the rise of generative AI applications like OpenAI's ChatGPT which could take consumer attention away from traditional search engines.
The good news is that Alphabet's valuation already prices in a worst-case scenario. With a forward price-to-earnings (P/E) multiple of just 18, shares trade at a discount to the Nasdaq-100 average of 27. And that's cheap for a company that grew its profits by 46% in the first quarter.
More importantly, Alphabet's economic moat is arguably the strongest in the world. And while antitrust regulation could chip away at this advantage, it won't destroy it. The company's Google search engine is so ubiquitous and popular that people will likely still want to use it, even if a different company owns the Chrome browser.
The challenges from AI look much more daunting. But Google's popularity could allow it to retain users by integrating AI results into its existing search businesses to keep customers from going elsewhere.
