Fundstrat’s Head of Research, Tom Lee, is warning investors that while Big Tech — including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and other Mag-7 companies — is out of the woods, a targeted “rolling bear market” is heading for other areas of Wall Street later this year.
A Fragmented Market Ahead
While Lee expects the broader market to show resilience into year-end, driven by “unrelenting demand” for artificial intelligence (AI), he believes the gains will not be evenly distributed.
Clarifying his outlook on prominent tech equities on CNBC, Lee stated, “I think we’ve already had a bear market in Mag-7 and software.”
While those high-flying sectors are expected to remain safe, the same cannot be said for the broader market. “I think there’s going to be a bear market in other stocks later this year,” Lee warned, pointing to headwinds that will squeeze companies that “got lofty.”
Three Catalyst Threats
According to Lee, the market is poised to confront three primary hurdles as the year progresses: typical midterm seasonal volatility, a looming supply overhang from upcoming tech IPO lockup expirations, and a critical energy crunch.
It is the severe energy bottleneck that Lee flags as the most immediate danger for the broader economy.
“There is a day of reckoning coming because the inventory of petroleum products is short and not being alleviated anytime soon,” Lee cautioned. Consequently, companies sensitive to these energy shortages are expected to bear the brunt of the downturn.
The Near-Term AI Playbook
Despite the warning, Lee remains heavily bullish on the underlying drivers of the U.S. economy—specifically energy independence and AI productivity. For now, investors are staying focused on near-term earnings.
“In the meantime, I think investors are focusing on AI fundamentals,” Lee noted, adding that the “stocks that are working are the ones that are selling something that’s scarce.”
While semiconductors could eventually approach bubble territory, Lee advises that the current momentum belongs to AI suppliers and Big Tech, while the rest of Wall Street faces an impending winter.
How Have Markets Performed In 2026?
The S&P 500 index has advanced 8.97% year-to-date. Similarly, the Nasdaq Composite index was up 13.38%, and the Dow Jones gained 4.54% YTD.
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 higher on Friday. The SPY was up 0.39% at $745.64, while the QQQ was lower by 0.42% to $717,54.
Meanwhile, Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), rose 0.60% on Friday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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