Veteran investor Tom Lee says a shift is underway in the AI trade, but notes that it is not the end for Big Tech names.
In a post on X, the Fundstrat co-founder highlights that investors are rotating within the same theme rather than abandoning it.
He says the move is a preference for suppliers or the picks and shovels over the tech giants themselves.
“The Mag 7 is selling off because investors favor ‘bullet makers’ over ‘armies’
– one of the major 2026 stories
– we view it as a rotation
– but investors will rotate back.
AI is still a crucial driver of GDP globally. And it’s also a disinflationary driver.”
In a new CNBC interview, Lee expands on the analogy, pointing to the industries benefiting from AI buildout.
“Data centers, industrials, materials, energy, Caterpillar, they’re all tied to the same thing, which is it is either the armies or the bullet makers. And I think the market is starting to want to own the bullet makers, not the armies, which are the Mag 7.”
He notes that the infrastructure names and the large technology platforms are ultimately linked by the same long-term trend.
“I think it is all one trade because it is a course about AI and the race to build an agentic model. So they are ultimately one trade. That’s one reason why I think Mag 7 will come back and the multiples will expand because you have durable businesses.”
Lee appears to suggest that he sees the Mag 7 eventually returning to form and dominating the market, and investors who accumulate amid the pullback will likely be rewarded.
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