AI bloodbath selloff may be nearing its end, according to Fundstrat’s Tom Lee, who also believes that the Magnificent 7 stocks and cryptocurrencies are approaching their bottoms. The co-founder and head of research at Fundstrat suggests that the recent market turmoil driven by AI fears and crypto volatility is showing signs of abating.
Lee pointed to the tendency of markets to bottom out on bad news, referencing the viral AI doom post from Citrini Research that triggered market jitters earlier in the week. He sees the recent market behavior as an indication that the bottom may be closer than many believe.
Tom Lee’s Predictions on Market Recovery
Lee noted that the Magnificent 7 stocks have been on the rise since February 17th, and software stocks have seen gains in the last two days, suggesting a bottoming out around February 23rd. He estimates that the rotation out of the Mag 7 stocks is nearing an extreme level, with investors being 95% through the decline. Similarly, he believes the software selloff is 99% complete and that cryptocurrencies are also in the final weeks of their pullback.
“Markets tend to bottom on bad news.”
He also highlighted the January barometer, which suggests that a positive January for the S&P 500 typically leads to a weaker February, followed by stronger performance in March and April. This historical trend supports his outlook for a market rebound in the coming months.
Why the AI Bloodbath Selloff May Be Ending
Lee remains committed to his investment themes for 2026, including energy and basic materials, which have already seen rallies this year. He also anticipates gains in industrials, financials, and small-cap stocks, driven by a strengthening economy. Furthermore, he maintains a positive outlook on the Magnificent 7 stocks, Bitcoin, and Ethereum, expecting a recovery as the selloff subsides. He believes the AI bloodbath selloff has created buying opportunities.
Lee’s perspective on Ethereum is influenced by his role as chairman of BitMine Immersion Technologies, an Ethereum treasury company. He notes that Ethereum has retraced a significant portion of its prior bull market gains, with the current retracement reaching 90%, suggesting that the correction is nearing its conclusion. He believes this presents a compelling entry point for investors.
Expert Insights and Market Performance
Lee is known for his accurate market forecasts, having correctly advised investors to buy stocks during the pandemic lows and predicting the 2023 bull market. While he has also made bullish calls on crypto, his track record lends credibility to his current predictions. He also weighed in on Nvidia’s earnings, pointing to record quarterly revenue and strong net income, plus shares trading at less than 20 times forward earnings.
The current market outlook indicates some pressure on U.S. stock futures, with gold, silver, and oil also experiencing declines. However, Nvidia shares are showing slight gains following their earnings release. Salesforce announced a $50 billion stock buyback, but mixed results are causing shares to drop. related Finance news Nutanix is surging after news of an investment by Advanced Micro Devices, while Trade Desk stock is tumbling due to a weaker revenue forecast. Snowflake stock is also down after mixed earnings.
In conclusion, Tom Lee’s analysis suggests that the AI bloodbath selloff and the broader market correction are nearing their end. His historical accuracy and detailed market observations provide a compelling case for a potential rebound in the coming months, particularly for the Magnificent 7 stocks, cryptocurrencies, and specific sectors like energy and industrials. Investors should carefully consider these insights when making their investment decisions.
