Tom Lee of Fundstrat Global Advisors says Friday’s stock selloff is a buying setup, not a bigger downturn. He pointed to crypto, memory and semiconductor stocks, which have pulled back to technical support.
The Cboe Volatility Index (VIX), Wall Street’s fear gauge, rose sharply on the day. Meanwhile, rising oil prices raised worries that tensions could escalate over the weekend.
Where Does Crypto Fit in Lee’s Buy Call?
Lee, Fundstrat’s head of research, told CNBC’s Closing Bell that AI fears escalated this week. He acknowledged AI debt markets may lack confidence. However, he argued the fundamentals and drivers of AI remain intact.
Lee said Fundstrat’s technical strategist, Mark Newton, thinks stocks could rally, with a bottom coming Friday or Monday.
Lee grouped crypto with memory, semiconductors, AI cloud providers and tech broadly as areas he sees as buys. He said all of them have pulled back to support levels, price zones where buyers have historically stepped in.
“I think the setup is for a buy on the memory, the semis, the neo clouds, tech broadly, crypto. I think that they’ve all pulled back to support levels at a time when people have become maybe very fearful of fundamentals,” Lee said
In contrast, Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management, blamed higher interest rates. Those rates pressure the more speculative parts of the AI build-out, such as cloud provider CoreWeave, he said.
ASML and Taiwan Semiconductor Manufacturing Company (TSMC) have both indicated demand remains strong, Greenhaus noted. Even so, he cautioned against reading the trouble at AI cloud providers as an early warning for the broader market.
“how many canaries have we killed in the coal mine over the last 3 years”
Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management, via CNBC
Can Funding Keep Up With Demand?
Meanwhile, Ed Clissold, chief U.S. strategist at Ned Davis Research, said capital has a price. The market is still working out that cost. A slowdown in the build-out is possible, he said, even with demand strong.
Large caps skipped September’s usual weakness, while small caps showed it, Clissold said. He suggested Friday’s drop may partly reflect that catch-up.
Third-quarter earnings should offer answers in a couple of weeks, he added. S&P 500 profit growth was expected at 25% last quarter and came in at 32%. Analysts now expect 25% to 26% for this quarter.
The panel largely treated demand as settled and instead debated financing, making the cost of capital central to the AI build-out.
