Transcription
Tom Lee has just said that a once-in-a-lifetime event is coming soon. The US is one of the biggest exporters of the most important tool in the next 10-15 years, which is AI products. I think that is going to set up for after 2026, over the next 2 years, some of the biggest gains of the stock market in our lifetime.
He thinks that the US is going to see something that many thought impossible. The US economic growth rate is actually starting to step up. You know, in other words, we could grow at 4% and for a mature largest economy in the world to start to accelerate growth, that's pretty astounding.
To understand this once-in-a-lifetime event, you need to understand the three phases that Lee says will happen in the markets. The third phase is where the opportunity is. It starts with the market rally, where the stock market goes up. This is the phase that we are currently in. Tom Lee estimates that the stock market will go to as high as 7,700 points on the S&P 500.
Our base case for this year is we rally towards 7,300 initially. Now, we're above that, but I think Yeah, and I think we can get to maybe 7,700, as high as 7,700.
After we see the stock market rally, we then go into phase two, where we see a crash in the market. Tom Lee outlines some of the reasons why he thinks we will see this crash.
But I think then we're going to digest a lot of things until October. And that's a new Fed chair, it's the energy shock that Liz talked about, especially shortages of petroleum products and lubricants. You know, AutoNation talked about it. And the third is the IPOs of SpaceX, OpenAI, and Anthropic, that when the unlocks happen, that's a lot of extra supply. So, I think that could pressure stocks in a way that feels like a bear market.
So, between sometime in June or July, he says we will start to see the start of this bear market, and it will last until October. He mentioned the IPOs of SpaceX, OpenAI, and Anthropic as one of the reasons for this pullback. These could be some of the biggest IPOs that the market has ever seen. So, why would this contribute to a bear market? Well, if investors choose to buy into these IPOs, which inevitably a lot will, they need to get money from somewhere to pay for this. Many investors may sell existing stocks such as Nvidia, Microsoft, or S&P 500 funds to make room in their portfolios for these IPOs. The money flowing into their IPOs could temporarily pull money away from the rest of the market. This is one of the short-term risks in the market now that could contribute to a pullback in stocks. But, the key thing is actually what will happen after the pullback, which we're going to talk about soon. The other short-term risk is the introduction of the new Fed chair, Kevin Walsh, replacing Jerome Powell at the helm. Markets often struggle when they need to understand a new central bank leader and just see what type of policies that he introduces. And the third risk is the energy shock. We could see potential shortages of refined products such as gasoline, diesel, jet fuel, industrial lubricants. If these products become scarce, energy prices can rise sharply. Higher energy costs then flow through the economy because transportation, manufacturing, and many businesses become more expensive to operate. That's can push inflation higher, which may make it harder for the Fed to cut interest rates. Higher inflation and higher interest rates are usually a headwind for stocks. He thinks that all three of these factors could contribute to a correction that feels like a bear market.
And so, I think we could have a drawdown that'll feel like a bear market. And as you know, that February to April wasn't just a 9% decline, but it felt like a crash. And so, I think markets are going to really struggle if we start to have a drawdown.
However, he does not see this as a long-term problem because this brings me into phase three, which is what happens after the pullback, which he estimates comes around the October month. He thinks that around that period, we will start to see some of the best gains that we will see in our lifetime.
And then, of course, from October, I think that's when a strong a very strong rally starts. Post midterms, I think we rally strongly in in 2027 is a year where we might see some of the best returns we ever seen in our lifetime.
So, somewhere between October and the start of 2027, we will see this giant rally. It's a big call to say that we will see some of the best returns in our lifetime. So, why does Tom Lee say this? Well, when you look past some short-term risks, there are some underlying tailwinds in the market. The first tailwind is what's happening in AI, which American companies are doing very well in. If you rewind this 30 years, there was this new technology on the horizon, this thing called the internet. Whichever country could dominate the internet would put a rocket booster underneath their stock market. Their stock market would increase. Of course, we know America kind of conquered the internet era. We use Amazon to buy things, Google to search things, Meta to connect with one another around the world. These type of companies built products that spread around the world, and billions of people use their services every day. As a result, the American stock market went up roughly tenfold over the past 30 years. And now, there is a new era coming into being, artificial intelligence, and a similar thing could happen for the countries and companies that come out on top. And right now, America is in the lead. OpenAI created ChatGPT, the fastest-growing consumer application in history. Everyone around the world is using it, and many paying monthly subscriptions. Anthropic built Claude, one of the world's most advanced AI assistants. Nvidia supplies the chips that power much of the AI industry. XAI is building one of the world's largest AI supercomputers. Microsoft is spending tens of billions of dollars on AI infrastructure, more than the GDP of many countries. Just as America produced many of the winners in the internet age, it currently owns many of the most important companies in the AI race. If AI becomes as transformative as the internet, the economic rewards could be enormous. Imagine everyone around the world paying to use American AI companies, just like what we're doing with America's big tech. This is one of the tailwinds that Tom Lee says can contribute to some of the best returns that we will ever see in our lifetime post October.
And now we're learning about the energy independence, right? America can deal with high oil because we're not going to have a shortage of it. And then there's further tailwinds coming cuz as AI moves downstream, it's really benefiting American businesses. The US is one of the biggest exporters of the most important tool in the next 10 15 years, which is AI products. So, I do think that plus the demographic tailwind of millennials and Gen Z adding to the workforce, but then also beginning to inherit generational wealth. I think that is going to set up for after 2026, perhaps, you know, like over the next 2 years some of the biggest gains of the stock market in our lifetimes.
So, those are the three phases that Lee projects will happen in the market, which the third phase could see the largest gains in our lifetime. That begs the question, well, how do we capitalize from these gains? How do we actually make money from this? Because it is Tom Lee's forecast, let me show you how Tom Lee has prepared to capitalize. He has a few unique strategies that he is employing to profit from the AI era. The first category that he is big on this year is this category here, energy and electricity, which demand is increasing from artificial intelligence. The big theme right now is AI. AI is here, and it's going to drastically change how the world operates. Does this mean that we go out and buy all of the big name AI companies? Not necessarily. Tom Lee thinks that some of the biggest winners from AI are the energy and electricity companies. It's expected that AI will require enormous amounts of electricity. Some estimates suggest that global data center power demand could more than double by 2030. With AI being the biggest driver of that growth. In the United States alone, data centers could consume over 10% of the country's electricity within the next few years. This is why the energy companies can make a lot of money from this trend.
picks this year in terms of sector is energy and basic materials. One of the things we identified in our 2026 outlook in early December was that energy and materials underperformed over the last 5 years at a level that in the last 50 years have marked turning points higher. So, we were betting that so much of the bad news was baked in that they could have okay fundamental years, but the stocks could do really well.
If we look at his portfolio, he owns about six stocks that can directly benefit from the growing electricity demand created by AI. These are his holdings from his Granny ETF. So, first, he owns Vistra. Tom Lee has roughly $102 million invested in the company. Vistra is one of America's largest power producers. As AI data centers consume more electricity, companies like Vistra could see demand for their power continue to rise. Second, he owns GE Vernova with approximately $88 million invested in the company. So, GE Vernova builds gas turbines, power generation equipment, and grid infrastructure. If AI drives a major increase in electricity demand, America will need more of the equipment that GE and Nova provides. Third, he owns Quanta Services worth about $95 million in the portfolio. Quanta helps build and upgrade transmission lines and electrical networks that will be important for AI. Fourth is Eaton with roughly $102 million invested. Eaton provides electrical equipment again used in data centers and industrial facilities. Fifth, he owns a Noet representing about 93 million of the portfolio. And sixth, he owns Texas Pacific Land with approximately $97 million invested in the company. So, Texas Pacific Land has vast acreage in the Permian Basin and benefits from energy production activity. Think of them like a giant landowner that collects tolls on energy production, water usage, power infrastructure, and potentially AI data centers. If AI drives a surge in electricity demand, that could ultimately require more energy production across the economy. I don't necessarily agree with everything that Tom Lee is doing. If you want to see what I'm doing, feel free to become a YouTube channel member. You just click here and you'll see member-only videos on my thoughts and what I'm doing in the stock market. The second key way that Tom Lee has positioned himself to profit from the AI era is through AI chips. Think of AI chips as the brains powering the AI revolution. Every time that an AI model is trained or used, billions of calculations need to be performed. That requires specialized processors designed specifically for AI workloads. This is why Tom Lee has bought companies like Nvidia, which is the dominant AI chip company. AMD, which is emerging as one of Nvidia's biggest competitors in AI hardware. Broadcom, which builds the custom chips and networking equipment that keep AI data centers running, and Cadence, whose software helps engineers design the next generation of AI chips. No matter which AI company comes out on top, they will all need chips to train their models. So, rather than trying to pick the next Chat GPT, Tom Lee is investing in the companies that power these models. I'll leave a link in the description on where you can view his whole portfolio with his Granny ETF. I mean, he does own a lot of stocks. He owns Goldman Sachs. He owns Monster Beverage. He owns Apple, Tesla, Amazon, Netflix. So, there's a lot of big names in the portfolio, too.
Okay, this may be the most interesting part of it. How much can we rely on Tom Lee and his forecasts? As usual, I like to take a look at the comment section to see what people are saying. Are they on board with Tom Lee's projection? So, Florida Boy said, "Tom Lee is one of the biggest bulls I've ever seen. Rain, sleet, or snow, the market will go up in his eyes." Yeah, I agree. He's basically a massive bull all of the time. Meg said, "When Tom is on, I'm all in." That's a big call. Gen X said, "Tom's hair alone can impact markets." I mean, to be fair, that hair is something else. NTS said, "Tom Lee is right. I used to laugh at his bullishness. Now, he's all I listen to in this market. He's feeling it this year, for sure." So, a lot of people are backing his prediction, and some people just seem to follow him blindly. Whenever he's bullish, they're bullish, which is he's bullish most of the time. But, he has also got a bit of pushback with regards to certain things that he's said in the past. Some people are doubtful. Mike said, "Tom Lee has no credibility in my opinion." Uh this guy said, "Can't trust anything Tom Lee says." Farshad said, "How can someone trust Tom Lee when his Ethereum investment is so much underwater?" Christine kind of made the same remark. "What happened to his ETH prediction of hitting 10k by 2025?" Yeah, and I think that's one thing I want to say, you can't just trust Tom Lee and his predictions blindly. He's very brave in making these predictions, especially because he's put timelines and dates on his forecast. And of course, the market sometimes behaves in the way that they want to behave. They don't always go according to forecast. Around July 2025, Tom Lee publicly discussed a 10K Ethereum target. He thought that ETH was going to 10K. His thesis centered on stablecoin growth, real-world asset tokenization, Ethereum becoming core financial infrastructure, stuff like that. Looking back on it, we did see a price increase from 2.5K to almost 5K. But after that, around August 2025, we saw a massive crash in ETH, and now it's trading around 1,700. So yeah, he got that Ethereum prediction wrong, at least as of now. Maybe Ethereum will go to 10K, but it didn't happen in 2025, the period that he projected. But you also have to give him his dues. At least this year, and with other predictions, he got things spot on. For example, Joe from CNBC outlines pretty clear how Tom Lee called very accurately the bottom of this year's correction.
In the past, you've made some calls that that people should never make, like it's going to be a good inflation number on Friday, and the S&P is going to be up, you know, 8% this week. And a lot of times it was borne out. And you've got a reputation for being fearless that way. The most recent thing that you did, we were going along quite nicely till the war, and I remember it was almost a mini liberation day sell-off, not quite as bad, but pretty steep. And you said, "It's already done, and by the end of this month, we're going to be significantly higher." And it was right in the midst of things hitting the fan. Not only did that happen, we we took off in April, just like you said, and we've continued in May. So I mean you you could take a complete victory lap, but you're right again this time.
So, at least with that prediction, he was pretty accurate and he has been accurate with a range of predictions in the past along with the ones that he has got wrong. Reality is, don't just take what he says for granted, go and study the reasons behind his forecast, study why he's saying that, and then make up your own mind if you agree or not.