Tom Lee Sees Buying Setup in Crypto and Tech Stocks

Market Drop Creates a Buying Setup, Says Tom Lee

When the stock market stumbles, it can feel scary for investors. But Tom Lee, the head of research at Fundstrat Global Advisors, sees things differently.

Following Friday's market selloff, Lee shared that he views the drop as a healthy setup to buy rather than the start of a deep downturn. He pointed specifically to crypto, memory chips, and semiconductor stocks as key areas worth watching.

The dip came alongside a sharp rise in the Cboe Volatility Index (VIX), which measures market fear. At the same time, rising oil prices sparked concerns that geopolitical tensions could escalate over the weekend. However, Lee believes these concerns may be overblown in the short term.

Where Does Crypto Fit in Lee's Buy Call?

Speaking on CNBC's Closing Bell, Lee acknowledged that fears surrounding artificial intelligence escalated during the week. He noted that AI debt markets might currently suffer from a lack of confidence.

Despite those worries, Lee argued that the underlying drivers and fundamentals of AI remain completely intact. He highlighted that Mark Newton, Fundstrat's technical strategist, expects stocks to rally soon, predicting a market bottom on Friday or Monday.

In his outlook, Lee grouped crypto right alongside tech heavyweights, including memory chip makers, semiconductors, AI cloud providers, and the broader tech sector.

Why? Because all of these asset classes have pulled back to key technical support levels. In simple terms, support levels are price zones where buyers historically step in to stop prices from falling further.

"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 explained.

The Counterview: Interest Rates and Funding Pressures

Not everyone on Wall Street shares Lee's unbridled optimism. Other analysts point to macroeconomic hurdles that could keep prices volatile.

Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management, pointed the finger at high interest rates. He noted that elevated borrowing costs place heavy pressure on speculative corners of the AI expansion, such as specialized cloud provider CoreWeave.

At the same time, Greenhaus noted that major chipmakers like ASML and Taiwan Semiconductor Manufacturing Company (TSMC) continue to report robust demand. He cautioned investors against treating problems at niche AI cloud providers as a broader warning sign for the entire market.

"How many canaries have we killed in the coal mine over the last 3 years," Greenhaus remarked, downplaying the idea that localized issues signal a total market crash.

Can Capital Keep Up With AI Demand?

Adding to the discussion, Ed Clissold, chief U.S. strategist at Ned Davis Research, brought attention to the cost of money itself.

Clissold emphasized that capital isn't free, and the market is currently trying to figure out its true price. He warned that even if underlying demand stays strong, high financing costs could lead to a temporary slowdown in the AI expansion.

He also analyzed recent market movements, pointing out that large-cap stocks managed to skip September's typical seasonal weakness while small-cap stocks did not. Friday's market drop in large caps might simply be a case of catching up to that seasonal reality.

Clissold noted that upcoming third-quarter earnings reports should give investors clearer answers. In the previous quarter, S&P 500 profit growth was projected at 25% but delivered an impressive 32%. For this quarter, analysts are targeting growth of 25% to 26%.

What This Means for Crypto Investors

Overall, the expert panel agreed that consumer and enterprise demand for AI and technology remains settled and strong. The real debate centers around financing and whether capital costs will slow things down.

For crypto investors, this correlation matters deeply. Digital assets often trade in tandem with tech stocks and broader market liquidity. If Lee's thesis holds true and tech rebounds from its support levels, crypto could see renewed upside momentum.

However, investors should keep in mind that crypto assets remain highly volatile. Unexpected macroeconomic shifts or sudden rate decisions can quickly trigger short-term pullbacks, so keeping an eye on risk management is always essential.