Tom Lee Urges Buying the Tech Dip, Calls Sell-Off a ‘Healthy Correction,’ Points to $30 Trillion Infrastructure Boom Ahead
Fundstrat’s Tom Lee advises investors to purchase technology stocks during the current market decline, describing the selloff as a “healthy correction.” Lee stated that capital allocated to artificial intelligence (AI) is “generating returns” as the sector embarks on a $30 trillion infrastructure expansion.
AI Infrastructure and Market Health
During a CNBC interview on Thursday, Lee argued that prevailing concerns surrounding AI are keeping the sector from forming a bubble.
“We’re continuing to see astounding discoveries made by AI,” Lee said. He explained that as long as these technological advancements continue, “every dollar of capital raised for AI is generating returns.”
Lee noted that tight debt markets are currently restricting a “runaway speculative boom” in the sector, which he views as a positive development. “I think it’s actually a very healthy correction that way,” he stated.
Highlighting the scale of the emerging industry, Lee projected significant capital expenditure, estimating that “AI is going to spend 30 trillion over the next 25 years.” He argued this represents a more critical infrastructure build than the previous rollout of mobile networks or roadways.
Approaching the End of the Selloff
When asked directly if he would buy the current market selloff, Lee responded, “Yes.” He explained his rationale by stating, “I think we’re near the end stages of the sell off because it’s become a consensus short to be shorting tech.”
Lee added that previous macroeconomic headwinds are easing, noting that the Federal Reserve is “flipping potentially dovish” and interest rates are “now back below 5%.”
Lee Defends the Mag-7 and Semiconductor Stocks
Regarding specific investment targets, Lee pointed to major technology components and companies. “I think the AI and the bottlenecks are the memories and the Nvidia’s and the Mag-7. They’re being sold because it is easy to short them now,” Lee said.
Furthermore, Lee noted that he also favors software and crypto investments. He described the current broad cyclical trade setup as a “coiled spring because the fundamentals have been holding in.”
To contextualize the current market volatility, Lee compared the AI sector to the early public internet era, noting that in 1997, Cisco Systems Inc. (NASDAQ:CSCO) experienced a “massive 50% drawdown” before rebounding significantly a year later.
How Has the Stock Market Performed?
The S&P 500 index has advanced 11.74% year-to-date. Similarly, the Nasdaq Composite index was up 11.94%, and the Dow Jones gained 9.27% YTD.
On Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed mixed. SPY fell 1.18% to $763.96, while QQQ declined 2.86% to $704.47. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.036% higher at $527.89.
In premarket trading on Friday, SPY was down 0.34%, QQQ was down 0.12%, and DIA declined by 0.73%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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