Tom Lee, managing partner and head of research at Fundstrat, said the artificial intelligence (AI) selloff is near its end, pointing to rates back below 5% and a crowded short trade in tech, even as the Nasdaq slides. The Dow sat more than 6% below the record it set earlier this month, according to a CNBC segment.
Lee Sees Two Headwinds Easing
Speaking on CNBC's Closing Bell, Lee said two headwinds have eased. The Federal Reserve may be flipping from hawkish to dovish, he said, while rates that had markets fearing 6% are back below 5%.
Lee named his preferred buys as Nvidia, memory chips, the Magnificent 7 megacap tech stocks, software, and crypto. He is also bullish on a broad cyclical rally, since financial stocks have lagged while rates fall. He made a similar case last week, when he called Friday's drop a crypto and chip buy. Separately, Lee chairs BitMine, a company that holds Ethereum (ETH).
Remaining Obstacles
Still, Lee named two remaining obstacles: debt markets are partly shut, and uncertainty over the war lingers. He called the funding chill healthy because it limits a runaway speculative boom. A Fundstrat report weighed $30 trillion of AI spending over 25 years and found plenty of capital to fund it, Lee said.
"I think AI is a more important infrastructure build arguably than mobile," Lee said, according to CNBC.
Analyst Flags Revenue Shortfall
However, Gartner senior director analyst Will Sommer sees a revenue shortfall. He says AI revenue will be too small to deliver profitable returns on planned spending, citing nearly $1 trillion of spending in 2026 and another $6 trillion through 2030.
Lee places AI in 1997, the year he said Cisco fell 50%. Historically, Cisco still peaked in March 2000, then lost nearly 90%, according to Sherwood.
The stakes reach beyond tech. The top 15 stocks hold a record 46.7% of the S&P 500, The Kobeissi Letter reported, against 27.2% in 2000. Whether debt markets reopen as rates ease may decide if Lee's bottom call holds.
