Fundstrat’s Tom Lee attributed the recent technology stock sell-off to a “blue tsunami” policy shock, comparing it to the market decline following the “Tariff Liberation Day,” and stated that extreme negative predictions regarding artificial intelligence are exaggerated.
Market Liquidation and the ‘Blue Tsunami’
Lee addressed the market turmoil on CNBC following the correction in the Nasdaq and the Dow Jones Industrial Average indices. He stated, “We got a policy shock because that blue tsunami, some rhetoric that scared people.”
He further explained that the overnight trading session in Korea “caused a lot of liquidation,” noting that there are currently stories of “large hedge funds actually being liquidated now.”
The ‘Tariff Liberation Day’ Comparison
Addressing the severity of the market’s reaction, Lee compared the current conditions to historical market shocks. “This is a lot like Tariff Liberation Day coupled with Deep Seek and coupled with situational awareness,” Lee said.
Lee stated that companies were previously “very ingenious” about handling the tariff shock, adding that “earnings held up.”
Drawing a parallel to current events, Lee predicted corporate resilience, stating, “I think companies are going to find ways to deal with this policy shock of the blue wave.”
AI ‘Doomsaying’ and Future Demand
Despite the market repricing, Lee maintained that the fundamental need for AI remains intact. He stated that the “demand side for AI isn’t going to slow, because there’s still a lot of discovery and companies are benefiting.”
Lee referred to discussions of a U.S. slowdown as a “speed bump,” and questioned the market’s reaction, asking, “Does that warrant the massive, massive repricing of these stocks? I think that’s overly done.”
Lee also addressed concerns regarding halted AI infrastructure. He noted that ten gigawatts of AI construction equals “almost 350,000 homes or like 5,000 hotels,” meaning states preventing this construction would face a “gigantic hole in their budget.”
Lee concluded that predictions of construction halts are premature, stating, “I think there’s a lot of doomsaying that’s maybe overshot.”
How Has the Stock Market Performed?
The S&P 500 index has advanced 7.22% year-to-date. Similarly, the Nasdaq Composite index was up 4.65%, and the Dow Jones gained 6.49% YTD.
On Thursday, 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 lower. SPY was down 4.41% to $733.00, while QQQ declined 6.49% to $647.05. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 3.53% lower at $514.27.
In premarket trading on Friday, SPY was up 0.44%, QQQ advanced 1.27%, and DIA was down 0.77%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo by Castleski via Shutterstock
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