Fundstrat’s Tom Lee says a long-awaited rotation may be taking shape as some of the most beaten-down stocks in decades begin to attract institutional attention.
In a new CNBC interview, Lee says big investors are already looking ahead to 2026, exploring bets outside of the mega-cap tech core while maintaining exposure to artificial intelligence giants.
He also highlights the extreme weakness in other areas of the market, noting a rare setup in historically underperforming equities.
“I think, you know, we are doing more Zooms with institutional investors where they’re talking about 2026, so they’re trying to position… There are plenty of stocks that have underperformed for three years you know where their underperformance is so severe you haven’t seen it in 50 years and so I think there is going to be some folks looking to buy mean-reverting ideas.”
Still, Lee says his eyes are peeled on AI leaders, noting that the names are still fairly valued despite bubble talks.
“I think the Mag 7 and the AI stocks are still reasonably valued because they’re growing at more than double-digit growth rates, and even Nvidia, the biggest name and most important stock, only at 29 times forward earnings, so they’re not demanding.”
He adds that momentum and visibility remain strongest in AI-linked names, pointing to real-world adoption and improving returns across industries.
“But I’d still say I like the AI. I think there’s a lot of visibility, and I think companies are starting to see payoffs, so it still makes sense to stick with it.”
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