In brief
- Tom Lee told CNBC he thinks the AI stock selloff has reached its bottom, arguing that supply remains tight.
- He pointed to cryptos reaction to the Binance hack as evidence that much of the selling pressure may already have passed.
- Strong AI demand has not insulated chipmakers from earnings concerns, and Bitcoin fund outflows show investors are still pulling money out.
Fundstrat co-founder and Bitmine chairman Tom Lee says the AI stock selloff has reached its bottom, arguing that demand remains constrained by supply and that cryptos response to a multibillion-dollar hack suggests investors have already done much of their selling.
“I think we're at the bottom,” Lee said in a CNBC interview on Squawk Box. His call follows a decline that has spread beyond individual AI companies: large technology stocks also sit inside the funds many people use to invest for retirement. (Disclosure: Tom Lee is one of several investors in Dastan, Decrypts parent company.)
Lee acknowledged how difficult it is to identify the point where prices stop falling. “Bottoms are dangerous because you don't know how much more downside you have at the bottom,” he said.
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His case rests on a distinction between an industry struggling to expand fast enough and one that has built more capacity than customers need.
“The market for AI is still very tight. It's not an overcapacity market,” Lee said. Constraints on spending, including political opposition, are slowing growth without signaling that the boom has peaked, he argued.
Strong demand still leaves earnings problems
The distinction matters for companies building the infrastructure behind AI, including data centers, the facilities that house the computers running these systems. A shortage can leave customers waiting, but it can also prevent suppliers from turning orders into revenue.
Intel offered a particularly sharp example on Friday, when its shares plunged nearly 30% to $65.76 after a disappointing fourth-quarter forecast. Its data center and AI revenue had risen 78% from a year earlier to $7.3 billion, yet manufacturing constraints limited its ability to meet demand.
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Intel projected quarterly revenue of $15 billion to $16 billion, with the midpoint about $1.6 billion below analysts expectations. Its weaker PC business added pressure, showing why healthy AI demand can coexist with a falling share price.
AI bros and crypto bros are on the same ship
Lee‘s second argument looks outside the stock market. He pointed to crypto’s relatively limited response to the Binance security breach, which the exchange initially estimated had an impact of about $6.3 billion.
“If crypto is a leading indicator for risk, you've already seen people sort of washed out,” he said. In his reading, a market that absorbs bad news without a much larger decline may have fewer sellers left to push prices down.
Bitcoin did fall about 4% to roughly $76,400 on Friday, and more than $1.3 billion in positions funded with borrowed money were forcibly closed. U.S. spot Bitcoin exchange-traded funds, which hold Bitcoin and trade like stocks, also shed $643.2 million that day, their largest daily outflow of October.
That said, a 4% drop can happen even during bull runs and it is considered a relatively normal occurrence among crypto traders.
Binance said on Friday that about $3 billion of the affected assets had been frozen and pledged to cover losses using its emergency reserve and company funds.
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