Fundstrat’s Tom Lee believes that investors are undervaluing the artificial intelligence (AI) sector.
In a new interview on CNBC, Lee says that the growth potential and impacts of AI are being underestimated by investors, highlighting how Oracle Corp (ORCL) shares surged this week after the tech giant reported a high demand for its cloud services.
[adinserter block="1"]“I think Oracle surging 41% after they report earnings tells me that AI is an undervalued sector, because how else do you explain a stock that is as large as Oracle gaining as much as it is unless it shows investors are really underestimating the future growth of AI…
AI is still a five or 10 year story… AI as a theme is continually underestimated, because I think a lot of people think this is money being spent without return. Oracle is showing you that there’s a lot of future growth.”
Lee also predicts that small-cap stocks will start breaking out after the Fed’s expected rate cut at its next meeting on September 17th.
“If we think AI is undervalued, what’s even more undervalued is small caps because that’s been held at bay because the Fed has not been cutting rates. The Fed has been on hold all year, and for the first time since last year, the Fed is cutting in September. A September cut after a pause has only happened in 1998 and in 2024, and both times were good periods for small cap stocks.”
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