Tom Lee Expects 20% Tech Rally, But Dan Ives Warns Of More Downside

• Lee dismissed the sharp selloff in data-center and AI-related names as a short-term reaction.
• He pushed back on suggestions that data-center opposition will permanently constrain the sector, as states facing budget needs will have difficulty replacing the revenue these projects generate.
• Lee said a large share of hedge-fund positioning is still concentrated in technology and that funds are unlikely to rotate heavily into defensive consumer staples.

Fundstrat’s Tom Lee said on Wednesday that Democratic gains in the midterms could ultimately prove positive for stocks rather than a headwind, and voiced optimism for a 15-20% rally in tech stocks.

Lee’s optimism for the tech sector stood in contrast to recent comments from Dan Ives of Yorkville Advisors, who anticipated a 10% to 12% correction in the Philadelphia Semiconductor Index (SOX) amid pressure on the tech trade following a Democratic sweep.

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“It's at least 15%, you know, tech could rally 20%,” Lee said in an interview with CNBC. He added that the sell-off seen on Wednesday was a “knee-jerk reaction because people have to find something to sell to buy what they want to own.”

His comments came as the neocloud names like Coreweave (CRWV), Iren (IREN) and others extended their decline and closed down 10-11%. However, big tech names like Apple (AAPL) and Microsoft (MSFT) hit fresh record highs. The Vanguard Information Technology ETF (VGT), which tracks the overall technology sector, clocked a modest gain of 0.2%.

AI Trade ‘Very Much Alive’, Says Lee

Lee, who is also the chairman of Bitmine Immersion Technologies (BMNR), said that the midterm election outcome is likely to force greater negotiation in Washington, reduce pressure on the Federal Reserve, and leave the central bank freer to operate without concerns over politically driven rate moves.

He dismissed the sharp selloff in data-center and AI-related names as a short-term reaction. He maintained that the AI trade remains intact, pointing to rising compute demand as more users adopt AI tools and noting that many states will still welcome the investment, even if on stricter local terms.

Lee also pushed back on suggestions that data-center opposition will permanently constrain the sector, arguing that states facing budget needs will have difficulty replacing the revenue these projects generate. “I do think it’s an overreaction today,” he said.

However, Ives’ concerns centered around investors giving AI spenders less time to show returns. According to him, some companies may need to limit borrowing and data-center expansion, with Oracle (ORCL) cited as a potential example. Ives, however, remains constructive on select names such as Microsoft (MSFT) and Alphabet (GOOG, GOOGL).

Ives also expects the Democratic win to result in a ‘seismic shift’ for the AI buildout.

Tech Rally And Broader Positioning

Lee said a large share of hedge-fund positioning is still concentrated in technology and that funds are unlikely to rotate heavily into defensive consumer staples. He suggested that investors may rebuild equity exposure into year-end and forecast that technology could rally at least 15%, with upside toward 20% in a move similar to the rebound that followed the Situational Awareness selloff in July.

Outside technology, he pointed to financials and industrials as beneficiaries of calmer rate expectations and open capital markets. On the Federal Reserve, Lee noted that odds of a December hike are declining and that falling energy prices could give policymakers more room to pause.

Earlier on Wednesday, Lee also said that the technology stocks hit hardest heading into the midterm elections, including memory, semiconductor, and neocloud stocks, are likely to rebound the most.

“The Democratic Party and the Republican Party aren’t either enemies or friends of tech. Tech has done well under both administrations,” he said.

How Did MAGS, SOXX Retail Traders React?

On Stocktwits, retail sentiment around Roundhill Magnificent Seven ETF (MAGS) fell from ‘neutral’ to ‘bearish’ territory over the past 24 hours, while retail chatter stayed at ‘high’ levels. Meanwhile, sentiment around the iShares Semiconductor ETF (SOXX) jumped from ‘bullish’ to ‘extremely bullish’ territory, coupled with ‘high’ message volume. 

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