Tom Lee Warns of Rolling Bear Market Beyond AI Giants

Artificial intelligence is becoming a central pillar of US economic growth and corporate earnings, according to Tom Lee, head of research at Fundstrat. Productivity gains linked to AI and persistent demand for computing power are supporting the Magnificent Seven, whose control of scarce assets including advanced chips, data centers and cloud infrastructure has helped the group separate from weakness across the broader equity market.

Lee said the Magnificent Seven have stabilized, but warned that other sectors could enter a “rolling bear market,” with declines rotating through the market rather than striking all stocks at once. Energy shortages, the US midterm elections and related policy uncertainty remain key risks. He expects capital to keep flowing toward AI supply-chain companies that control scarce resources and retain pricing power as investors become more selective.