Transcription
10 years ago, when we first wrote about Bitcoin and recommended a 1% allocation, it was $1,000, and it was just on the idea of digital gold. Today, crypto is a much more relevant story. Yesterday, I was at the NYSE Digital Asset Summit. ICE and the major banks are using tokenization and crypto rails to really update the legacy tech stacks of banks. It's really central to their future. And we know that many AI companies, their engineers tinker with crypto on weekends because they know in the future, to really manage AI agents, which could be more wealthy than us, we need to keep sovereignty by using decentralized systems. Crypto is a still a central to the future of AI and the financials, but it is a story that struggled because AI's and memories are much more exciting story. I, I think, without question, Bitcoin today is like Bitcoin at a thousand. It's misunderstood. It's really, and especially, contract platforms like Ethereum.
Bitcoin looks broken. The headlines are filled with fear. Volatility has shaken confidence, and many investors are beginning to wonder if the best days of crypto are already behind us. But what if the market is sending the wrong signal? What if today's uncertainty is being mistaken for weakness when, in reality, it's laying the foundation for the next major move? That's the argument Tom Lee has been making.
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Rather than viewing the recent slowdown as the end of the cycle, he believes investors may be underestimating how much has fundamentally changed. Bitcoin is no longer a fringe experiment. Wall Street is steadily embracing digital assets. BlackRock is pushing tokenization into mainstream finance. AI infrastructure is increasingly intersecting with blockchain technology, and layer two and layer three networks are expanding the utility of the entire ecosystem. Yet, despite these structural shifts, market sentiment remains unusually cautious.
So, the real question isn't whether Bitcoin has changed; it's whether the market has fully understood what it's becoming. Could this be another moment where the fundamentals are improving faster than the price reflects? Not another Bitcoin at $1 scenario, but another period where conviction is scarce just before broader recognition arrives. Tom Lee believes the next wave of adoption may come from a younger generation that already sees digital assets, AI, and tokenized finance as a natural part of the future. If he's right, today's bearish narrative may eventually be remembered not as the beginning of the end, but as the calm before the next major breakout.
Young people today bank through apps. Uh, in the future, they're going to be trading stocks and very likely, as Robinhood has pointed out, you're going to be trading it on a crypto platform. It's a tokenized stock. I mean, look at what happened with oil trading over the weekends. That's all using crypto rails. Crypto is a little hard to understand, and people don't like to deal with wallets, but young people, which is the next generation of users, are really big adopters. So,
Are they now, though?
Well, they're not as wealthy, and I think you're absolutely right. There is FOMO because it's easier to buy the memory stocks, but I think, without question, in 12 months, we're going to say crypto was an a downstream story of AI, just like memory was sort of a has-been story in 2024 and 2025, right? That they, they were stuck. They didn't go anywhere. And look what happened in 2026, they all went parabolic.
Well, for a reason, though. We're in this historic build-out of AI and and the whole infrastructure. I mean, where is that moment, if you will?
Scott, it's, it's actually happening. For instance, BlackRock is tokenizing almost every asset. Almost every asset is going to be built on a crypto rail. It is more efficient. It offers finality, and it lets it trade 24/7. It's what's called composability. It's really turning financial assets into software. It's happening, but hey, it's a slow and then sudden. So, to me, it's been 2026 has been a big setback year. It's disappointing, but to me, the fundamental progress is still there.
Everyone is watching oil, expecting it to tell them where the economy is headed next. But, what if the market is asking the wrong question? Tom Lee believes something doesn't quite add up. Despite wars, geopolitical uncertainty, and endless predictions of an energy shock, oil never exploded the way many experts expected. Now that prices have pulled back, could the market have overreacted once again?
The real story isn't happening in the oil market. It's happening at the gas pump. That's where optimism or fear begins to spread through the economy. If gasoline prices stay elevated, consumers pull back, spending slows, earnings come under pressure, and suddenly the narrative shifts from resilience to recession. It's a domino effect that markets can't ignore forever.
Yet, this is where the debate becomes fascinating. Investors have been willing to look past higher energy costs because one force has dominated every conversation: artificial intelligence. AI has become the market's excuse to stay bullish, pushing concerns over inflation and slowing growth into the background. But, what happens if those two stories collide? If inflation refuses to fade, while consumers continue to lose purchasing power, does the AI boom remain strong enough to carry markets higher? Or is this the risk almost everyone is overlooking before the next major move? According to Tom Lee, that's the question investors should be paying far more attention to.
And Mike, it obviously tells us oil might have overshot to the downside in the near term, but I think it is interesting how, uh, oil prices never rose as much as people expected. So, then maybe they overshot to the downside. And I think structurally, the war, as much as we want to see peace, it's less of a problem for the US stock market.
Yeah. Does it remain less of a problem? I mean, is there, is there a breaking point where we think we've reached a deal only to have yet another step forward, two steps back?
Yeah, I think the factor to watch is US gasoline prices, what consumers are paying at the pump, because that's what filters into household consumption forecast. That's what potentially filters into some earnings forecast. Now, of course, analysts have been able to ignore the issue with higher gas prices because they've been able to focus on AI, but if gas prices remain elevated for this long, we could start talking about having more downward pressure on GDP forecast and because it eats into to consumer spending. There's a lot of hope that falling gasoline prices would allow consumer spending to start to rebound, mostly in the context of real wages still being negative. So, if gas prices remain high, inflation remains high, real wages negative, that suggests maybe weaker growth.
At first, Tom Lee's prediction sounded almost impossible. An S&P 500 target of 8,000 seemed too optimistic, especially with inflation, geopolitical tensions, and constant fears of an economic slowdown dominating the headlines. But here's where his argument becomes interesting. He isn't expecting stocks to surge because investors suddenly become more optimistic. He's arguing that corporate America will simply earn more money. That's a subtle but important difference. Many rallies are driven by excitement and higher valuations. Tom Lee believes this one could be driven by stronger earnings instead. In other words, companies grow into today's prices rather than markets becoming dangerously overvalued.
Of course, the road there won't be smooth. Inflation is still elevated. The Federal Reserve remains a wild card. Global conflicts continue to threaten supply chains. And massive IPO lockup expirations could add fresh volatility. Those risks are real, and markets may struggle with them over the coming months. But here's the contrarian view. While investors are focused on today's uncertainty, Tom Lee is already looking beyond it. If earnings continue improving despite all the noise, today's fear may end up being remembered as another period where the market looked weakest just before fundamentals quietly became much stronger.
You raised your target today, didn't you, on the S&P?
We did. Yes.
Why?
Um, it's really a catch-up. You know, we had 7,700 at the start of the year, but the S&P 2027 earnings was 350. We're now at 400. We're applying a lower multiple to get to 8,000.
Say we're at 400, that's you?
Yeah, that's the Fundstrat earnings. It's consensus is about the same, 350, 352 or so. And we're putting a...
Consensus is 352 and you're 400?
I'm sorry. Was 352, and it's now 398. So, we're, it's about in line with consensus. But the PE multiple we're applying at the end of this year is 20 times, and that gets us 8,000.
And we get there by earnings, not, not an expanding multiple.
That's right. The multiple, I think, arguably should expand 'cuz we've had so many black swans, and yet the equal weight PE is lower today than it was 5 years ago.
Us there? 'Cuz, I mean, the market feels like it's fighting for, for something internally. We're having this rotation away from the mega caps, as I was just discussing with Dan Ives. Like, what's going on here?
Well, I think by the end of this year, we, we're, we're, we're facing a lot of turmoil in the near term 'cuz we have inflation, and today's PCE is telling us maybe the number, the level of inflation speak, but it's still pretty high.
Mhm.
We've got the war and the shortages it's going to create, and we, of course, have the Fed, and the market's going to test the new Fed, especially his new policies. And we have the lockup expiration of these massive IPOs. So, I think there's a lot for the market to digest. But by the end of the year, we're going to be looking at 2027, where a lot of this is anniversary'd in, and I do think that's going to be the start of one of the biggest rallies of our lifetime.
On. Isn't part of the message in the mega-cap pullback, we've, we've reached sort of peak tolerance for spending from these companies?
Yeah, and I think it's an adjustment. You know, it's a they went from asset light to asset heavy. So, it's like they kind of gained a lot of weight, and we're just wondering if they're attractive still. But for every user that is now leveraging AI to generate income, that person's going to be willing to spend more for their service. So, I, I think there is monetization, and we're just starting to see it.
All right, hang on for 2 seconds.
We're at 7350. We'll call it there now. You've been making the statement that even as you raise to 8,000, you expect a pretty big swoon sometime this summer.
Yes.
And then a massive rally to get you back to 8,000. I mean, you, you better have a huge rally off whatever you're talking about to reach 8,000 if you really expect some correction of magnitude when, when you're here.
That's right. Uh, Sizz God, yes, I think there is a drawdown. You know, margin debt now is up 55% year-over-year. It's like, it's the fifth highest in almost 75 years. It's almost always associated with a need to adjust for that speculation. So, I think that's the fourth reason we have a drawdown. But the reason I think we rally so big next year is kind of what Dan said: that the hyperscalers are going to monetize all of what they've built, and that's going to create prosperity for, for Americans who use AI. I think it's really going to be a time of actual disinflation and a lot of growth, and that's why we can get well beyond 8,000 by the end of the year.