Tom Lee: A Choppy 2026 Ahead for Equities and Crypto
Audio Brief
Show transcript
This episode features Tom Lee of Fundstrat discussing current skepticism in AI and Bitcoin, their long-term growth potential, and a bullish market outlook for 2026.
There are three key takeaways from this conversation. First, differentiate investment theses for AI and crypto, with AI focused on valuation and crypto on market penetration. Second, traditional valuation metrics may need to evolve for tech-integrated companies, especially banks leveraging AI. Third, anticipate market volatility in early 2026, with a potential 10 to 15 percent correction followed by a strong recovery.
Lee notes that while both face skepticism, AI grapples with justifying high valuations post-run, whereas crypto's growth potential is vast due to its low market penetration. He highlights only 4 million Bitcoin wallets with over ten thousand dollars, compared to 900 million traditional accounts.
He argues that as sectors like banking increasingly become technology companies through AI integration, their traditional lower valuations are no longer appropriate. This suggests a re-rating of tech-forward financials and pure-play AI companies is warranted.
Lee forecasts a market pullback of 10 to 15 percent in the first half of 2026, followed by a significant recovery. This rebound is underpinned by anticipated pro-business policies from a White House put and the potential return of a Fed put.
Ultimately, Lee presents a forward-looking perspective, emphasizing the transformative potential of AI and crypto despite current market skepticism and anticipated volatility.
Episode Overview
- Tom Lee of Fundstrat discusses the current skepticism surrounding the AI and Bitcoin markets, highlighting their distinct yet occasionally overlapping narratives.
- He analyzes the long-term growth potential for both AI and cryptocurrencies, suggesting that the best years for crypto are still ahead due to low market penetration.
- Lee provides a forward-looking perspective on market valuations, arguing that certain tech companies and even tech-forward banks are undervalued relative to their future potential.
- He offers a bullish outlook for 2026, anticipating a market pullback in the first half of the year followed by a significant recovery, driven by political and monetary policy factors.
Key Concepts
- AI vs. Crypto Skepticism: The discussion explores whether the investor skepticism in the AI trade and Bitcoin are related. Tom Lee suggests they are "related but not related," with AI facing questions about valuation and appropriate pricing after a strong run, while crypto's fundamentals are improving despite concerns like quantum computing.
- Crypto's Untapped Market: Lee argues that the crypto market has immense room for growth, pointing out that there are only 4 million Bitcoin wallets with over $10,000, compared to 900 million traditional brokerage and IRA accounts of similar size, representing a 200x larger potential market.
- AI's "Super Worker" Potential: The long-term value of AI is framed as its ability to transform the existing workforce. Lee states that AI will make 130 million U.S. workers into "super workers," creating a multi-trillion-dollar market in the U.S. alone.
- The "Bleeding Edge" Phase of AI: The current AI cycle is compared to the early days of the internet and mobile technology, where the technology (the "bleeding edge") is ahead of its practical applications. This suggests that killer apps and new business models are yet to fully emerge.
- Re-rating of Tech and Financials: Lee posits that AI-centric companies like Nvidia and tech-forward banks like JPMorgan should trade at higher multiples. He argues that as banks increasingly become technology companies, their traditional, lower valuations are no longer appropriate.
- The "White House Put" and "Fed Put": Lee's bullish 2026 outlook is supported by two key factors: a "White House put" (pro-business regulation and potential gridlock post-midterms) and the return of the "Fed put" (the Federal Reserve stepping in to support markets), which he believes will come back into force.
Quotes
- At 00:11 - "Uh, related but not related." - Tom Lee's initial response when asked if the skepticism around the AI trade and Bitcoin are connected, setting up his nuanced view on the two market narratives.
- At 01:44 - "In crypto, the best years are definitely ahead. Because today there's only 4 million Bitcoin wallets with $10,000 in it. There's 900 million IRA and brokerage accounts globally that have $10,000, so there's, that's a 200 times larger market." - Highlighting the massive, untapped addressable market for cryptocurrency adoption.
- At 05:54 - "So I think the first half next year could be down 10 to 15% and then a big recovery." - Providing a specific forecast for 2026, anticipating near-term volatility before a strong rebound in the second half of the year.
Takeaways
- Differentiate your investment theses for AI and crypto. While both are high-growth tech narratives, their immediate challenges are different: AI is about justifying high valuations, while crypto is about capturing a vastly larger user base.
- Consider that traditional valuation metrics may need to evolve for companies becoming deeply integrated with technology. As legacy sectors like banking adopt AI and digital infrastructure, they may warrant a re-rating closer to tech multiples.
- Prepare for potential market volatility in the first half of 2026. Anticipate a possible 10-15% correction, which could present a buying opportunity ahead of a projected strong recovery fueled by favorable political and monetary conditions.
