Major Bull in the Crypto Circle Tom Lee: The Sell-off of AI and Cryptocurrencies is Nearing Its End

AI trading and crypto assets may be approaching a phase bottom after experiencing a round of intense sell-offs. Tom Lee, co-founder and research head of Fundstrat, believes that the pullback in software stocks, the Magnificent 7, and cryptocurrencies has entered the "final weeks."

This assessment comes at a time when Nvidia reported "solid" earnings, but the market's reaction remained restrained. Nvidia CEO Jensen Huang also publicly stated that the market's sell-off in the software sector was a "misjudgment," and whether this view can be accepted by capital will directly affect the speed of sentiment recovery in the AI chain.

In a video briefing to clients, Tom Lee stated that the market often bottoms out amid "bad news." Earlier this week, a viral post from Citrini Research with an "AI apocalypse" theme stirred emotions, and he believes such shocks may actually indicate that a bottoming area is forming.

From a strategic perspective, he used the "January barometer" to support risk assets: after the S&P 500 rose 1.5% in the first week of January and 1.3% for the entire month, February is often a "retracement month," with a median monthly decline of about 0.4%. Subsequently, March may strengthen, with an average increase of 2%, and April's performance may be even better.

Bottom Signal: Bad News Triggers "Bottoming Mechanism," Rotation Approaches Extremes

Tom Lee's core logic is "bad news bottoms out." He specifically mentioned the impact of Citrini Research's viral bearish content on sentiment earlier this week and judged that the market may "have already reached a relatively late position."

In his view, the process of capital withdrawing from core crowded trades is nearing extremes, indicating a decrease in marginal selling pressure. He informed clients that the decline of the Magnificent 7 has "completed about 95%," the sell-off in the software sector has "completed about 99%," and the pullback in cryptocurrencies is also in the "final weeks."

Pressure Points in AI Trading: Nvidia's Solid Performance, Software and Magnificent 7 Show Signs of Recovery

The sentiment recovery of the AI mainline first depends on whether the divergence of "strong hardware, weak software" can ease. Jensen Huang stated that the market "got it wrong" regarding the software sell-off, providing a clear counter-signal for expectations in the software chain.

Tom Lee also evaluated Nvidia's earnings report from a fundamental and valuation perspective, stating that its quarterly revenue is record-breaking, net profit is strong, and pointed out that its stock price corresponds to a forward P/E ratio of less than 20 times, "about half of Costco's valuation."

In trading terms, he emphasized that software stocks have risen for two consecutive days and believes that February 23 is a phase bottom, while the rebound of the Magnificent 7 since February 17 aligns with the judgment that "the sell-off is nearing its end."

Cryptocurrency: Pullback May Enter Final Stage, Tom Lee Bets on ETH Rebound

In the crypto market, Tom Lee continues to maintain a bullish stance, believing that this round of decline is nearing its end, particularly pointing out that ETH will stop falling and rebound.

It is important to note that Lee is also the chairman of BitMine, a treasury company for Ethereum. This identity means that his views may be seen by the market as a stronger expression of position, and investors will pay more attention to potential conflicts of interest when referencing his judgments

Configuration Clue: Continue to Favor the Cyclical Theme for 2026 While Betting on Core Assets' Return

In terms of industry and style, Tom Lee continues his thematic framework aimed at 2026, stating that energy and basic materials are the directions he previously emphasized, both of which have seen increases this year. He also believes that in a "stronger 2026," industrials, finance, and small-cap stocks also have conditions for growth.

At the same time, he has not abandoned his previous core bullish targets and remains optimistic about the Magnificent Seven, Bitcoin, and ETH.

Lee has been regarded as a relatively accurate market forecaster for suggesting buying stocks at the pandemic low and capturing the 2023 bull market, but he has also made more aggressive price predictions for crypto assets, including believing that Bitcoin could "easily reach $200,000 by the end of 2025" and predicting it could rise to $1 million in the coming years