Fund strategist Tom Lee told CNBC’s Squawk Box that the recent plunge in AI‑focused equities appears to have hit its floor. Lee, co‑founder of Fundstrat and chairman of Bitmine, argued that the market’s tight supply dynamics and a surprisingly muted crypto response to the Binance security breach suggest the worst of the selling pressure may be over. His comments come amid broader concerns about earnings at AI infrastructure firms and continued outflows from Bitcoin‑linked funds.

Tight Supply Keeps AI Demand Constrained

Lee emphasized that the AI sector is not facing overcapacity; instead, it is grappling with a shortage of chips and data‑center resources needed to meet soaring demand. He highlighted Intel’s recent earnings miss as a case in point: the chipmaker’s shares fell nearly 30% after forecasting fourth‑quarter revenue below analyst expectations, despite a 78% year‑over‑year rise in AI‑related revenue. Lee said the mismatch between demand and supply can delay order fulfillment, but it also prevents companies from turning that demand into immediate earnings growth.

Crypto’s Limited Reaction to Binance Hack

The analyst pointed to the crypto market’s reaction to the multi‑billion‑dollar Binance hack as a barometer for broader risk sentiment. Binance initially estimated the breach’s impact at roughly $6.3 billion, yet Bitcoin only slipped about 4% to around $76,400, and spot Bitcoin ETFs recorded a $643.2 million outflow—the largest daily outflow for October. Lee argued that if crypto, often viewed as a risk‑on asset, has already absorbed such a shock with modest price movement, the pool of sellers left to drive further declines may be limited.

Continued Pressure on Bitcoin‑Linked Funds

Even as Lee sees signs of a bottom, data shows investors are still pulling money from crypto‑related vehicles. More than $1.3 billion in leveraged Bitcoin positions were liquidated on the day of the hack, and U.S. spot Bitcoin ETFs experienced significant outflows. These trends underscore ongoing caution among institutional and retail investors, despite the relatively small price dip in Bitcoin itself.

What to Watch Next

Analysts will be monitoring AI chip manufacturers for any signs of easing supply constraints, as well as upcoming earnings reports that could confirm whether demand remains robust. In the crypto space, the next major security incident or regulatory development could test Lee’s hypothesis that the market has already shed most of its risk‑averse participants. Additionally, Bitcoin fund flows and leveraged position data will provide clues on whether the crypto sector is truly stabilising or poised for further volatility.