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Uh, I don't know when the correction ends, but once it ends, I think the current stock market, the AI stocks, the memory names, the semis are going to make much, much higher new all-time highs. So if someone is long these names, they should stay long. If they sold and got out and then they're waiting for a signal to get in, they're going to end up chasing markets higher. Selling your winners is like cutting your flowers and watering the weeds.
Our bet is that inflation is going to undershoot expectations. People are too focused on oil as a driver of inflation, and we've already had the oil shock. So I think we've had peak inflationary impact from oil.
Crypto has so many catalysts. The Clarity Act is going to provide a single agency to have oversight of the entire crypto economy that doesn't exist today. It's all state-regulated, and there's fragmented regulation. Japan and other countries are already taking a similar version of the Clarity Act. Russia just passed one. So the US obviously has to catch up.
Today, we are delighted to have Tom Lee, co-founder and head of research for Fundstrat Global Advisors and CIO of Granny Shots ETF. He's the former chief equity strategist for JP Morgan and also chairman of Bitmine Immersion Technologies company. Tom, thank you so much for joining us today.
>> Thanks for having me.
>> So on June 22nd, the Korean index, the KOSPI, reached almost 9,300. The same day, the SOX gets to, you know, reaches a high as well. And then in the last month, it's really taken a serious, serious tumble. And people are asking, you know, why the impulsive rally, then this sudden turn? You know, or in some ways, are we following the KOSPI? Is the KOSPI following us? Or is it just a global concern that, you know, we've overdone the AI trade?
>> Well, you know, Korea has been doing really well for more than just 2026, really the last few years. And the underlying story there is the world is using a lot more semiconductors and memory for every unit of GDP output, which means Korea, as an economy and Korea as a stock market, is a lot more important in the next decade than it's been in the prior 30 years, even 50 years. So earnings should be doing really well. Now, stock markets are what you call, quote, "price discovery mechanisms," and it made sense that Korea's stock market should be going up. But in the last few quarters, leverage products were added, and that amplifies volatility. So I think, in some ways, the move, this sharp move up and then the recent record decline, are adjusting for that leverage because, as you know, markets when they go straight up, they trap what they call "longs," get trapped, especially those with leverage, and then they're forced to sell. So I think there's been a forced deleveraging taking place. Um, but that doesn't mean that the underlying story has ended. So I think that this pullback is going to prove to be one of the best buying opportunities for semis and AI stocks, and by transitive logic, the Korean stock market.
I don't know when the correction ends, but once that ends, I think the Korean stock market, the AI stocks, the memory names, the semis, are going to make much, much higher new all-time highs.
I guess it's hard to see before you actually see it, but what kind of signal would you be looking for to say that, you know, we've the retracement has ended and now this is the opportunity, or maybe the opportunity is now and you stagger your way in? What's the signal that you would be potentially looking for?
>> First, it never pays to time the market. So, if someone is long these names, they should stay long. If they sold and got out and then they're waiting for a signal to get in, they're going to end up chasing markets higher. Nobody ever calls the bottom correctly. However, the thing that you want to see, which is massive deleveraging has already taken place. So if you look at prime brokerage data for US investment banks, hedge funds degrossed, quote, "degross," meaning that they already sold their tech longs at the fastest pace in almost three years. In fact, if you go past it, it would be really the fastest pace in almost 10 years. So they had a massive, massive deleveraging already. And we already see some very, very high-profile stories about how there's been a massive deleveraging in Korea. So if people had to be forced to sell, those are called, like, "weak hands." They've been shaken out. I'd say that we should be pretty close to a bottom. But again, I think, you know, the mistake people make is they chase things. You know, they try to time the top and they try to time the bottom. And most people who've done the best are the ones who stay invested. In fact, as Peter Lynch famously said, "Selling your winners is like cutting your flowers and watering the weeds." And maybe even better, you know, I think when there's a secular theme like AI, which involves more semis and memory for every unit of GDP output, Charlie Munger said it the best. He says, "The money isn't in buying and selling. The money is made in waiting." So if there's a structural theme, they should just own it and then forget about it.
>> You know, in fact, I like, I remember one of the phrases you told me in one of our meetings is, "The bear sounds smart, but the bulls make money." And, you know, over time, that's really proven to be very, very true. I have a question about valuation and, you know, as a former equity strategist, you probably know this a lot better than I do, and certainly our audience would love to hear about it. I look at an Nvidia and I think their forward P is probably somewhere in the 20s.
>> It's actually 16.
>> 16. Wow. So they're, I guess their earnings are terrific or their forward earnings expected. But, you know, SK at the highs, I think was seven, and now it's four and a half. You know, is it right to compare and say, you know, what, those names and SK? It's ADR came, I think, a week or so ago. Is it fair to compare those side to side, or is there something we should think about?
>> You know, I, I mean, I don't want to give too much of a history lesson, but Nvidia has proven it's got a recurring revenue business to an extent because they have the CUDA platform, and there's almost a guaranteed roadmap for people to buy the upgrades. So I think it should be rerated as a growth stock. So I think it should be more in the 25-30 times. Now, memory and semicap equipment, and what I call "two steps removed from the customer," have what's known as the risk of a bullwhip effect, meaning these industries can be more cyclical because they don't have pure order visibility. So let's say that the end market is really a consumer using an AI lab service, right? ChatGPT, OpenAI, or DeepSeek. But then they're subscribing through a lab, and that lab is using a hyperscaler, and then that hyperscaler buys chips from Nvidia, but then Nvidia is ordering the chips and, etc., from the suppliers. Then the suppliers are removed from the customer. And in the middle of that, there's a lot of double ordering, right? People order because if they think memory prices and chips are going to go up in price, hyperscalers might be double ordering in anticipation of price increases. They order now. And then memory companies might, down the road, create too much capacity. That actually has always happened in every cycle. And of course, there's a risk it could happen this time. So more cyclical groups tend to have the lowest PEs at the peak of a cycle. So you should expect the multiple to come down, but it's not a bear signal. It just means you still want to bet on earnings revisions.
Uh, so I think there's going to still be a lot of earnings revisions. I mean, down the road, in a machine-to-machine world, those are going to be a lot more memory-intensive and a lot more storage-intensive than a human is, right? Because a human eats food and has a nervous system, and a robot needs memory and storage. So I think you're going to see the economy becoming increasingly memory and semi-intensive. So the earnings revisions should be up. But, uh, I, I wouldn't compare necessarily, you know, memory multiple to an Nvidia.
>> I know you just said you don't want to go into a really long history lesson, but I think it's sometimes your memory of how a lot of things happened is really useful for a lot of investors. You know, if I recall when Cisco ran into trouble, it was something of this bullwhip effect where they saw orders collapse because, you know, in 2001, because people had overordered, and all of a sudden, you know, it was like a stack of dominoes that went over. So, is that a relevant lesson to be keeping in mind, or are we just too early for that?
>> Well, eventually the AI story is going to become a bubble. I mean, it's a fact because anytime you have a structural demand story and then volatility is underestimated in markets, then people make risk-adjusted adverse decisions because they underestimate the risk. But I think we're not, I don't think we're in the late stages of this AI bubble. The reason I don't believe it's late stages is that as soon as the Korean stock market fell, most people declared a top. You know, if it was a bubble, people would say, "This is a bottom, and they should be plowing into the Korean stock market and into semis," and they haven't. They've been massively selling.
So if I was to look at Cisco, okay, and let's just take a really short period from 1993 to 2000, okay? A seven-year period, but it was really one cycle, which is the internet buildout. Cisco started at 80 cents and in '97 got to $9. Okay, so at a 10x move. And then in '97, it had a 40% correction. Now, in '97, that was at the time of the Asian crisis. Okay, so people would have said, "Okay, well, the top isn't, the Cisco story is over." Well, it went from $5. By 1998, it went to $18. Okay, so twice its prior high. And then in '98, we had, you know, the Greenspan "exuberance" and a few other things happening, and like a Russian default and, you know, Long-Term Capital, and Cisco went from $18 to $9. Okay, so it fell 42%. And a lot of people called the top there in tech. In fact, I remember that period. There were a lot of people that were dancing on the graves of tech, saying the trade was over. Cisco went from $9 and by 2000 hit $80. So it had a 100 times move from '93 to 2000, and it was a five times rise from its highest high in 1998, and that only took another 18 months. So that's when Cisco really truly peaked because, as you correctly point out, the last orders were in. Now, keep in mind, in 2000, when I was a tech analyst, the top was in in 2000 because nobody believed valuations at that point. Cisco was 200 times earnings. Underlying all that was the fiber being laid across the US. These telcos, in order to justify the valuation of the telcos, you had to have a 10-year DCF with a 30 exit multiple and a cost of money of like 6%. Unrealistic assumptions. And these were the actual buyers of Cisco equipment, right? They were the true customers. That was a farce. So if someone says, you know, is today that story? It's not. I mean, the number of people using AI is still quite small. It's already showing to be quite productive. The companies buying this equipment, the hyperscalers, they are very, very serious companies. They're not hypsters trying to dig up the ground and sell irus. They are companies that are actually buying and putting up racks and getting big orders. So I think we're not, it's not a bubble yet.
>> On the subject of AI, we just had the other, you know, the, I guess was Thursday night, Friday morning. The "Kimmy moment," they're calling it, the "Kimmy moment," something like the DeepSeek moment. Um, and what, I guess the shock was, and not as bad as DeepSeek, at least in the markets, was you have this Chinese open weight, 2.8 trillion parameters. That's kind of just numbers to me, but something that was apparently quite impressive. And although it wasn't as cheap as some of the other ones, is there, so I guess the concern is, if you have potentially a Chinese model that could do nearly as well, is that going to like, decelerate potentially the investment in some of these US names, the OpenAI's of the world, the Anthropic's of the world, or will simply the demand go over to a Chinese model?
>> I think the answer to that actually is ultimately above our pay grade. Meaning, what we already know today is AI is actually extremely capital intensive to maintain because equipment wears out and then there's tokens burned to run all this. And open-source models are cheaper, but part of it is they're like generic drugs because they didn't have R&D. And a lot of them are distillation models. Now, those models are open source, but they can't be truly free because someone's got to pay for it, as they say. So, the one question we don't know is how are these models ultimately funded? But the second is, as Elon Musk says, we're kind of like hurtling towards a singularity, like where AI and robots could create so much productivity that everything essentially becomes free. I mean, like, that's a disruption to even capitalism. So, like, I think the answer is, I don't know. I mean, it makes sense that, you know, like, I'm really oversimplifying it, but there's Linux and then there's Windows, and then there's Android and iOS. So the answer is, you know, I don't know. But is it negative for the hyperscalers? You know, I don't think so. I mean, again, these are all very serious companies, you know, and they could choose not to, just the way Apple has chosen not to. And it's Apple's produced a lot of free cash flow, but they had to endure criticism for not being AI-forward at the time. So I think, you know, investors, that's an existential question, but that's very difficult to answer. And instead, they should just focus on where opportunities exist.
>> Speaking of opportunities, we've had quite the first half. So your feelings and prognostications, if you have them, that you feel reasonably confident about for the second half? July tends to, in recent history, be a very good month for stocks. Though now, so far, it's been mixed due to sort of events beyond our pay grade, as you say. What do you see for the, what are the themes that you see for the second half of the year for the equity markets?
>> Well, I think that our strategies have been working so far this year because, you know, if you look at what we've liked, our best sort of execution of that is our Granny Shots ETF, GRNY. And year-to-date, it's outperformed the S&P 500 by like 120 basis points, and it's a top decile fund this year. So we're outperforming more than 92% of all fund managers with Granny. And that's because we stuck with long-term things. You know, we still believe in AI as a downstream same story, and we still believe in cybersecurity and security. And we are betting on monetary easing by the Fed, even though the market's gotten hawkish. And in fact, small caps are doing exceptionally well this year, and that's probably the biggest clue that the Fed's going to be dovish. So I'd say that we didn't make a lot of changes to our view on Granny for the second half, and I think we're sticking with the idea that earnings growth is accelerating, and we're in earnings season now. I think the AI story is very much intact, but we are willing to buy the downstream story. So like Mag 7, software, and crypto should are the downstream of AI stories, and they're beginning to outperform. And the other piece is, I do think the Fed, the bond market is hawkish, thinking the Fed has to hike. Our bet is that inflation is going to undershoot expectations. People are too focused on oil as a driver of inflation, and we've already had the oil shock. So I think we've had peak inflationary impact from oil. The underlying inflation drivers are weakening because housing's weak, wages aren't really accelerating, and that would put the Fed in a position to actually cut rates, which would be dovish.
>> I completely agree with you. I just don't see this Fed. They may make hawkish noises, but, you know, I'm not sure that they have really any real intent to hike. And granted, I think you're up to $4.5 billion in assets under management, which is...
>> Uh, what's actually total is close to $5 billion.
>> Five billion now. Excellent, excellent. I have some of it. Maybe I'll just invest in that and stop trying to pick bottoms and pick tops.
>> Yeah. Well, I mean, Granny's example, like, you know, when people, when AI and the memory stocks are going up, people are criticizing Granny because we didn't load up on the AI and semi-names. We do have exposure, but when you had a 40% drawdown of memory and AI, Granny outperformed, you know, because we focused on really the anchoring on the longer-term ideas within the AI trade.
>> Right. Um, I do want to switch gears and ask you about Bitmine. Uh, it's an Ethereum treasury company, the first, I guess, maybe the first or most prominent of its kind. And, um, give me an idea, you know, I guess MicroStrategy at the time, or Strategy, was the first Bitcoin treasury company, but they've had some struggles very, very publicly. Can you tell us, you know, what the difference is between sort of the idea, how it's executed, versus something like Strategy?
>> Well, just to clarify, EBitmine is the largest Ethereum treasury, you know, and actually the largest holder of Ethereum in the world with almost 5.78 million ETH coins. But it's actually not the first Ethereum treasury. It was probably the fourth or fifth, but we became the biggest. And we just crossed one year of operations because we had a very simple strategy. We kept the capital structure very simple, and we wanted to accumulate Ethereum. And so that's how we've been able to grow so rapidly, and we're, I think, five times bigger than the next Ethereum treasury. And to contrast us to MicroStrategy, you know, MicroStrategy, I'm still quite bullish on. In fact, we own it in the Granny Funds because I'm bullish on Bitcoin. But we take a very different approach. One is, well, the two biggest differences, maybe I should highlight three. But the first is the native asset. Bitcoin is a store of value, and the ecosystem around Bitcoin wants to, quote, "oify" Bitcoin, you know, not introduce changes, make it always a store of value, like digital gold. By contrast, Ethereum is a yield-bearing asset, roughly a 3% yield, and that's because it's proof of stake. So the security work is done by those who are staking ETH, and in return, they get paid a yield. And the ecosystem is developing, and it's the largest ecosystem in crypto, bigger than even Bitcoin. And they are trying to position, and successfully so far, to make Ethereum the financial settlement layer for Wall Street. So the entire financial rails probably will run on stablecoins, which run on ETH Ethereum. The second difference is that MicroStrategy has a, some arguably, a somewhat passive approach to Bitcoin, meaning they own it and they want to create digital credit. Bitmine is very active in the ecosystem. You know, we've funded, we have a lead investor in three spin-offs from the Ethereum Foundation, all of which are targeted to strengthen Ethereum and either focused on improving price or strengthening the ecosystem. And there's more. So we are really part of helping shape the future of Ethereum. And the third is balance sheet complexity. MicroStrategy, by design, has a complex balance sheet. They have convertibles, and they have four classes of preferred stock, and they have common equity. And in some cases, those components of the balance sheet compete with each other. And because Bitcoin has no native yield, they have to sell stock in order to fund the dividends. Bitmine has a very simple capital structure. It has common equity, and we just launched a perpetual preferred. The staking yields that we're generating today at the current price of Ethereum is about $6 million a week, about $300 million a year. If Ethereum goes to $5,000, then this gets close to a billion a year, and it would be almost $20 million a week. But our perpetual preferred offering has $30 million a year in dividend requirements. So we can fund our preferred easily with our staking yield. And so I think we have a simple capital structure. We are betting on the future of Ethereum as a settlement layer for not only Wall Street but for how robots communicate, and we're part of the ecosystem. So I think you should think of Bitmine as highly, highly integrated into Ethereum.
>> Would it be fair to say you could invest in Ethereum, the token itself, the coin itself, or you could invest in Bitmine? Are they, in some ways, very, very similar?
>> Yeah, I mean, I think if someone is owning Ethereum, then they can buy the coin, then they can stake it. You know, that's, they'll be fine. But there's two kinds of investors that can't do that. One are institutional investors. You know, the large asset managers that run huge funds can't buy ETH, the native token, because they would actually have to maintain a crypto wallet. But they can buy equities. Bitmine is in the Russell 1000 large-cap index, and it's traded on the NYSE. So it's the only Ethereum large-cap stock that they could buy today. So if you're a large manager in Boston and you want to have exposure to Ethereum, you have to buy Bitmine. And by the way, the Russell 1000 is the largest and most widely used benchmark index. The second investor is someone who wants to actually use options and derivatives, or is just wanting to buy higher exposure to ETH. Bitmine outperforms Ethereum on the upside. Bitmine has a whole bevy of options that trade. In fact, it trades on perpetual markets too. So it's arguably a better way for active equity investors to get exposure to Bitmine. And that's really a much larger universe because the universe of stock investors is $240 trillion. The universe of native crypto investors is a couple hundred billion. So I think it's better to kind of bet on what the equity world will do and that they're going to end up buying Bitmine.
>> It certainly makes a lot more sense. If I own the coin, I have to go and stake it. That requires effort and a certain level of knowledge. And if I've got somebody managing it, maybe I ought to do that. Or if I want to clip some coupons, you know, nine and a half percent on the preferred with, as you mentioned, plenty of coverage, seems to be a really good way of clipping coupons. If it was big enough, Warren Buffett would probably buy it all.
>> Yeah.
>> Um, I want to talk a little bit about crypto as a space. It's, you know, it's been, it had a pretty big drawdown. Um, and now it seems that there is almost neglect. There's really people aren't involved in it. People aren't really, don't seem to be talking about it. Um, but if you, I'm looking at the Bitcoin chart and it looks like it might be about to break out, or could break out, at least in a consolidated way, of a fairly long downtrend. So, is crypto, you know, that this neglect, is that going to end soon? What would it take for crypto to be as exciting as it was not very long ago?
>> Uh, well, I think you're describing a bear market, you know, like in bear markets, people don't talk about stocks, you know, when them when Apple was down, no one talked about Apple, right? So we know price drives sentiment, and crypto's been in a drawdown. But you'd expect at the bottom, people to be bearish. In fact, that's exactly what makes a bottom is, you know, it's a deleveraging, people, and then you reset expectations. Crypto has so many catalysts. I mean, since the end of June, Ethereum has outperformed memory stocks by 72 percentage points. I mean, that's pretty huge. Um, you know, people have lost 40% in memory and they've made almost 30% in Ethereum. Um, and now the Clarity Act is on the, as they say, "one-yard line." That will open up the floodgates because the Clarity Act is going to provide a single agency to have oversight of the entire crypto economy. That doesn't exist today. It's all state-regulated, and there's fragmented regulation. Japan and other countries are already taking a similar version of the Clarity Act. Russia just passed one. So the US obviously has to catch up. This is going to create institutional adoption of crypto. That's a bigger market than anything that's existed in crypto before. So I think it's, you know, if someone's been in crypto a long time, they've been in the hobby phase, I'd call it Ethereum 1.0 because it was memecoins and NFTs. This future market is stablecoins, payment rails. You know, Robinhood wants to tokenize everything. And by the way, they could have built on any blockchain. They built Robinhood Chain on Ethereum. They launched it. It's already a breakaway success. More than a billion dollars of volume daily on Robinhood Chain. And it's generating, Robinhood might make a billion a year from this chain that they just launched. It is a massive, massive hit for them. So I think every Wall Street firm is watching what Robinhood did and realized there's a lot of money to be made tokenizing assets onto Ethereum.
>> Well, I noticed that, I think Robinhood is one of your top holdings in Granny.
>> Yeah.
>> Um, so that makes a lot of sense. You know, it reminds me when you just said, when in a bear market, nobody talks about it. It seems like, I don't know if you watch it, but gold and silver, the same way. The buzz was overwhelming six months ago, and now there's nobody asking about it. So I wonder if any thoughts on gold and silver. Have we, you know, are we seeing something similar to what we may be seeing in crypto?
>> Yeah. Well, you know, gold's made a huge move. Like, you know, gold isn't as volatile as other assets because it's a store of value. And if you look at the last three-year move, it's probably, in its entire history, I'm talking, you know, 12 centuries of history for gold, it was like a five standard deviation move. So it makes sense gold has to consolidate that rise. And I think, you know, maybe, I don't know, maybe it's got 10% downside, but that's pretty much it. I think gold has proven to be a real store of value. So at Fundstrat, we've legitimately advocated to own a port, a stake in gold. I don't know, less than the Bitcoin holdings, but let's say it's 1% in gold. And I think it's a good hedge because in the future, you know, whether it's debt uncertainty or AI's disruption or social unrest, these are kind of things that could make gold incredibly important in the future. And I, nothing's changed because in an AI world, gold's safety haven as a store of value probably hasn't changed. So I think, you know, everyone should own it. But, you know, it had a big move, so it needs to consolidate.
Well, Tom, thank you so much for spending so much time with us today. We look forward to having you on the show again.
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