Tom Lee and a JPMorgan Manager Call the AI Rout Normal: Will Nasdaq Rally 15%?

Fundstrat’s Tom Lee says he would buy the AI stock dip and expects a 15% Nasdaq rally. His video update posted Friday, a day after the tech-heavy Nasdaq-100 fell 6.36% and erased $2.3 trillion in value.

Holders of chip and AI stocks took the heaviest losses. Yet Lee’s own Granny Shots US Large Cap ETF (GRNY), which owns many of them, is up 7.5% this year versus 11.7% for the S&P 500, he said.

Why Does Lee Call the AI Selloff a Buying Chance?

Lee blamed the drop on fears that a Democratic “blue tsunami” in Congress will choke AI spending.

He pointed to August. The Nasdaq-100 fell about 12% from June 30 to early August, then the S&P 500 rallied 15%, he said.

Democrats may delay data center spending but will not stop it, Lee argued. A split Washington also eases White House pressure on the Federal Reserve (Fed), he said.

“But bottom line, I think that I would be buying this AI dip.”

Lee first floated a 15% to 20% tech rally on Wednesday, before Thursday’s AI chip crash. Lee, who also chairs Ethereum (ETH) treasury firm BitMine, cited crypto’s rebound as a bull market signal.

JPMorgan Asset Management equity portfolio manager Jack Caffrey also called the drop normal. The Nasdaq should see one or two corrections a year, he told CNBC on Friday.

Companies he met this week reported order backlogs of 12 to 24 months, Caffrey said. He called that a long-term earnings story investors can buy into.

What Could Break Lee’s 15% Rebound Call?

Lee’s case leans on falling bond yields and oil prices. This week’s data pulled the other way.

Brent crude traded near $98 a barrel on Thursday. On Friday, US payrolls rose 165,000 in October, far above the roughly 65,000 expected.

That data lifted bets on a December Fed rate hike. Lee had argued the Fed now faces less pressure to tighten.

Caffrey saw it differently. Speaking before the jobs data, he said the Fed was on a path of gradual tightening, and that a hot report would keep it there. October payrolls came in at more than double expectations.

Tech analyst Dan Ives had forecast a 10% to 12% drop in chip stocks after a Democratic sweep, Stocktwits reported. The Philadelphia Semiconductor Index fell 12.25% on Thursday alone.

Thursday’s selling also hit more than 400 stocks in the S&P 500, not just the AI leaders, Caffrey noted. Risk managers and margin calls, rather than portfolio managers, were driving many trades, he said.

Chipmakers bounced Friday. AMD rose about 8% after a 17% fall.

On October 26, Lee told viewers the AI selloff was ending. Ten days later, the Nasdaq slid into correction. Jim Cramer had called Friday’s jobs data the midterm rally’s real test. The Fed’s next rate decision comes in December.