Nasdaq Sell-Off: 2 Tech Stocks Down 58% to 86% to Buy Right Now

The 4% drop in the Nasdaq Composite Index (NASDAQINDEX: ^IXIC) on March 10 served as a wake-up call to investors. While that was not a record drop by any measure, it was the worst one-day decline since the fall of 2022, meaning many newer investors had never experienced a comparable decline.

Admittedly, such feelings could have investors running for the exits. Nonetheless, such bargains also mean stocks are on sale. The market has recovered from every previous downturn in history, and with a bit of patience, could experience a comeback in these two stocks.

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1. AMD

One of the more confusing things in the market is the price action around Advanced Micro Devices (NASDAQ: AMD). In recent years, AMD evolved into a diversified semiconductor company that designs chips for data centers, PCs, embedded products, and gaming systems.

Indeed, when it began competing in the AI accelerator market, AMD was behind Nvidia, and it has not caught up to the market leader. Moreover, the lack of updates for chips AMD provides to gaming consoles has left that part of the business struggling.

However, these businesses give AMD some diversity in the chip industry, and except for the gaming segments, its financials are improving.

In the fourth quarter of 2024, revenue of $7.7 billion grew 24% yearly. This is up from the year-ago quarter, when revenue grew at only 10% annually.

The company's data center segment, which designs AI accelerators and now accounts for around half of overall revenue, experienced a 69% revenue increase. The client segment, which makes PC chips, claims about 30% of revenue and benefited from a 58% rise in revenue.

The slump in the embedded segment seems to be ending, with revenue down only 13% yearly. Hence, it seems like the 59% drop in gaming revenue is what continues to spook investors.

Nonetheless, gaming, like all parts of the chip industry, deals with periodic slumps. That does not change the fact that 80% of AMD is growing at a rapid clip.

This has dramatically improved AMD's profitability. Although the trailing price-to-earnings (P/E) ratio of around 98 may look pricey, a forward P/E ratio of about 21 is an earnings multiple better suited for a mature, slow-growth enterprise. When the market finally recognizes that AMD is still a growth stock, its shares could easily recover that 58% drop and again achieve record highs.

2. Roku

Admittedly, the recovery story for Roku (NASDAQ: ROKU) may appear more far-fetched than that of AMD. Roku achieved its record high at the height of the 2021 bull market, and with profitability elusive, the 86% discount could look more like a reason not to buy the stock.

Nonetheless, despite the entertainment stock's performance, the shift from traditional TV to streaming has continued. This is crucial because Roku derives most of its revenue from advertising. The company has built a following because it brings viewers, content providers, and advertisers together and invests heavily in ad tools to improve the client experience.

Engagement continues to improve. The number of households on the platform (90 million) grew by 12% from last year. The fact that streaming hours rose 18% over the same period shows that viewers made greater use of the platform.

Roku has likely forgone profitability to invest in its business. This work has resulted in Roku becoming the No. 1 TV operating system in the U.S., Canada, and Mexico. The company has also worked to promote platform usage in Europe and Latin America, building scale while facilitating engagement that can eventually lead to monetization.

Consequently, in the fourth quarter of 2024, revenue rose 22% annually to $1.2 billion. Additionally, Roku experienced signs of improvement in one metric that has frustrated investors, average revenue per user (ARPU). In Q4, ARPU rose 4% to $41.92. While that may not sound significant, ARPU growth was flat or negative for several quarters, indicating that the company's in new markets may finally begin to bear fruit.

Elusive profitability leaves Roku without a P/E ratio. However, it trades at a rock-bottom price-to-sales (P/S) ratio of just 2.5. This is far below 2021 levels when the sales multiple briefly exceeded 30, and as ARPU growth continues to improve, it could spark a recovery in the stock that leads to massive gains.

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Will Healy has positions in Advanced Micro Devices and Roku. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Roku. The Motley Fool has a disclosure policy.