Tom Lee warns: The seven tech giants have stopped falling! But other sectors may enter a "rolling bear market"

Fundstrat Research Director Tom Lee Issues Warning: The bear market for the Big Seven Tech Giants has ended, but other sectors on Wall Street are now entering a “rolling bear market.” Three major risks—energy shortages, the midterm election cycle, and the lifting of restrictions on tech IPO lock-ups—are about to erupt all at once.
(Background: Tom Lee predicts a 20% crash in the US stock market)
(Additional context: US stock valuations are approaching the bubble peak of 1999)

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• The end of the Big Seven Tech Giants’ selloff doesn’t mean the market is out of the woods
• Three major risk factors are about to be triggered in a concentrated wave
• Energy shortages: the most direct risk
• Looking favorably at two core supports

Fundstrat Research Director Tom Lee has recently issued a warning to investors. Although the “Big Seven Tech Giants” (Mag-7)—including Apple, Microsoft, Nvidia, and others—have already moved out of their prior downturn, this does not mean that overall market risk has been lifted. He believes that sometime later in 2026, other sectors on Wall Street will gradually enter a round of “rolling bear markets.”

The end of the Big Seven Tech Giants’ selloff doesn’t mean the market is out of the woods

In Lee’s view, demand driven by AI remains strong, which will support major indices to maintain a certain level of resilience before year-end. However, this support is concentrated in only a few sectors, and the divergence within the market will continue to widen.

In an interview with CNBC, Lee said, “The bear market for the Big Seven Tech Giants and the software sector has ended.” But at the same time, he emphasized that the performance of these sectors cannot represent the overall market situation. In other words, the recovery of the Mag-7 looks more like a localized improvement rather than a broad-based rebound.

Three major risk factors are about to be triggered in a concentrated wave

As time moves on, Lee pointed out that three factors will become major sources of market disruption:

• Midterm election cycle: The US midterm elections will take place in the second half of 2026. Historical data shows that market volatility typically rises by an average of 15% to 20% around election cycles
• Tech IPO lock-up restrictions coming off: Tech companies listed from 2025 through the start of 2026 will see concentrated lock-up expirations, which could trigger selling pressure
• Tight energy supply: Lee considers this to be the most direct source of risk

Energy shortages: the most direct risk

Among the three risks, Lee sees energy as the most urgent hidden problem. He noted that current inventories of petroleum products are low and are unlikely to improve in the short term, warning that “a clearing point is approaching—petroleum product inventories are in short supply, and there is no near-term way to ease it.”

As a result, companies with higher dependence on energy may face greater pressure in the upcoming adjustments. This also includes the semiconductor manufacturing industry, where process electricity demand is surging as AI chip output increases.

If you zoom back in on Taiwan, Taipower had already announced in 2025 that it would stop supplying nuclear power to new data centers north of Taoyuan. Competition for electricity between the AI and semiconductor industries has already begun. Tom Lee’s energy warning is also an early alert for Taiwan’s tech supply chain.

Looking favorably at two core supports

Although he is cautious about the outlook for some areas, Lee remains optimistic about two core supports for the US economy: energy independence and productivity gains brought by AI. He suggests that investors focus at this stage on directions with stronger earnings certainty.

He said, “Right now, investors are focusing on AI fundamentals; what truly strengthens are the companies that control scarce resources.” Under this preference for capital, funds continue to flow into companies along the AI industry chain as well as large technology firms.

However, he also mentioned that the semiconductor sector has already shown signs of overheating to a certain extent, but in the short term, capital momentum still leans toward AI suppliers and technology leaders. By contrast, other industries on Wall Street may gradually enter an adjustment phase.

This article is not investment advice.