About 1.2 million accounts in South Korea hit with margin calls — Tom Lee sees rebound possible in second half

AI-related stocks have come under heavy selling pressure in recent weeks, but Tom Lee, chairman of Bitmine and co-founder of Fundstrat Global Advisors, said a rebound could come sooner than many expect.

Speaking to CNBC on Friday, Lee said the companies caught up in the recent selloff sit at the heart of what he called "one of America's strategic initiatives" — artificial intelligence — and that significant growth potential remains for years to come.

He added that the recent market correction was, in his view, a healthy development, cooling speculative excess ahead of earnings reports from AI-sector companies.

"I still want to hold those names," he said. "I think they will bounce back in the second half of this year. I don't think the trade is over."

However, Lee cautioned that leverage has become pervasive in markets, amplifying volatility. He criticized zero-day options and leveraged funds as tools that make it "too easy for anyone to get leverage."

He estimated that margin debt has risen 54 percent year over year — the sixth-largest annual increase in the past 60 years. In each of the five previous surges, markets found stability at similar levels, he noted.

The same dynamic played out sharply in South Korea, where a nationwide stock-trading boom took hold as shares of SK Hynix and Samsung Electronics surged on the back of the AI frenzy. Demand to maximize upside exposure fueled the launch of leveraged ETFs, adding further momentum to the rally.

But the boom reversed sharply in recent weeks. The Kospi, which hit an all-time high last month, has since plunged 27 percent, entering bear-market territory.

The fallout triggered margin calls on about 1.2 million accounts — as many as 10 percent of all brokerage accounts in South Korea, Lee said. Investors were forced to liquidate holdings to cover margin debt, setting off a broad-based correction.

The shock reverberated globally. After SK Hynix announced plans last month to slow the pace of its AI memory chip business, the Kospi recorded its fifth-largest single-day decline on record, dragging down equity markets worldwide.

Still, Lee viewed the relatively contained damage elsewhere as a positive signal. The S&P 500 is down just 2 percent from its peak and NASDAQ off 6 percent — modest moves compared with the Kospi's 27 percent plunge.

"The sequential correction we're seeing is very healthy because it's not the whole market going down," he said. "Investors are rebalancing into assets like the Magnificent Seven or software names."