Tom Lee: Chip selloff a ‘textbook’ buying opportunity

Fundstrat research head Tom Lee described the recent chip-stock selloff as a ‘textbook buying opportunity’ after a rout that began in Asia and spread to U.S. markets. South Korea’s benchmark KOSPI fell about 10%, triggering losses across technology shares.

Macroeconomic worries, including renewed fears of a Federal Reserve interest-rate increase and concerns about high valuations, contributed to the decline. In U.S. trading, the iShares SOXX semiconductor ETF plunged roughly 8% in one session while the tech-heavy Invesco QQQ Trust ETF fell about 3%.

Lee pointed to historical patterns going back to 2011. He noted semiconductor stocks have posted daily declines of 6% or more on 17 prior occasions, excluding the most recent event, and that about 88% of those instances saw the sector erase those losses and reach higher levels within a month. ‘This has proven to be a buyable pullback basically every time,’ he said.

Demand for artificial intelligence infrastructure underlies the bullish case for many chipmakers. Advanced AI models require large amounts of processing power and specialized memory, which has driven strong demand for high-performance chips and related hardware. The iShares SOXX ETF has risen nearly 90% since late March, and the Roundhill Memory ETF (DRAM) has gained about 150% since its debut in early April.

Industry participants report a supply-demand imbalance that has given some semiconductor companies greater pricing power, allowing margins to expand even as customers face higher component costs. Apple chief executive Tim Cook warned, ‘For the June quarter, we expect significantly higher memory costs,’ and said rising component expenses will affect the company’s planning.

Analysts describe a contrast between device makers and chip vendors: higher component prices compress margins for equipment manufacturers while supporting revenue and pricing trends for semiconductor suppliers. Investment into semiconductor equities has continued despite episodic market volatility.

Market participants assessing the sector must weigh the possibility of a near-term rebound against ongoing macroeconomic risks. Lee presented the selloff as an opportunity for long-term buyers, citing past short-term recoveries and demand from AI-related infrastructure.