Stay Far Away From These 2 Tech Stocks

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With the first week of September kicking off, the broader market faces a critical test. New highs may be within striking distance, but if we're dealt a rate cut with a side of less-than-dovish commentary, things could start getting choppy again. Undoubtedly, tech stocks could continue to be the epicenter of pain should coming tech firm earnings and outlooks come up short of expectations.

Though some of the largest and most influential firms have already reported, numerous smaller tech firms could still move the markets in a big way. So, with sights set on forward-looking guides, the following two tech stocks may be worth trimming now that their valuations skew to the high side historically. Let's quickly look at three names that'd be on my sell list going into September.

Key Points About This Article

• The tech sector could continue to see the most volatility as the Nasdaq 100 struggles to recover.
• Some of the hardest-hit tech titans may still have more room to plunge further.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.

Super Micro Computer ( NASDAQ:SMCI ) stock has already crashed by more than 62%, thanks partly to some serious allegations raised by Hindenburg Research. The research firm, who's short the stock, accused the fast-rising data center company of accounting manipulation, compliance failures, and sanction evasion. These serious allegations could entail further downside for SMCI shares if proven true. Additionally, Super Micro's delayed filing for its fiscal year 2024 annual report is not a good look at this stage in SMCI stock's free-fall.

In light of such a report, it's tough to justify holding onto the name on the way down. Hindenburg may have "fresh evidence" of accounting issues, but until we've got crystal-clear, definitive evidence, I wouldn't bet against the name either.

Should Super Micro prove its innocence to the glaring allegations, its stock could explode higher as investors look to punch their ticket back to one of the market's hottest AI data center plays at a steep discount. At writing, SMCI stock goes for an obscene 12.87 times forward price-to-earnings (P/E), making the stock an obscene steal if Super Micro's managers can clear the air on the allegations.

I think SMCI stock could go either way from here. Hindenburg may be a big name in the short world, but its short report issuance does not guarantee negative returns from here. Either way, it's probably better to take a rain check on the name until management is given more time to restore investors' confidence.

Tesla ( NASDAQ:TSLA ) had short-sellers on its back just a few years ago. And though Tesla stock is in a tough spot today, now down over 22% in the past two years, they're still up a great deal from when many bears placed their bets against the EV juggernaut back in 2020.

With Canada recently announcing a massive 100% tariff on Chinese vehicles imported from China, Tesla will be forced to shift gears logistically, given that many Teslas shipped to Canada come from its Chinese factories. For Tesla, the solution is simple—just ship Teslas destined for Canada from U.S. factories. Over the long haul, the super-sized Canadian tariff seems like a much bigger problem for Tesla's Chinese EV rivals, who may struggle to gain traction in the Canadian market.

For now, the potential for tit-for-tat tariffs between the U.S. and China could stand to weigh the most on Tesla. It'll cost the firm big bucks to move things around to better steer clear of tariffs. Additionally, the firm's China growth could take a big hit if China retaliates with big tariffs of its own.

For the time being, I'd avoid TSLA stock as volatility kicks things up a notch. The stock boasts an incredibly high beta of 2.29, which entails more significant market risk. Indeed, should the S&P 500 spill by 2% on any given day, Tesla could find itself down by more than 4%.

Further, with numerous macro unknowns (will Fed rate cuts come fast enough to prevent anything more than a soft-ish landing?) that could impair EV demand over the medium term and the rather lofty 60.3 times trailing price-to-earnings (P/E) multiple attached to TSLA stock, it's probably best to look elsewhere for value in the tech scene at this most uncertain of crossroads.

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