Big Technology Podcast Episode Summary

Title: Is AI Actually Saving The Stock Market?
Host: Alex Kantrowitz
Guest: Tom Lee, Chief Investment Officer at Fundstrat Capital
Release Date: June 25, 2025

Introduction

In this episode of the Big Technology Podcast, host Alex Kantrowitz engages in a deep conversation with Tom Lee, the Chief Investment Officer at Fundstrat Capital and head of research at FS Insight. The discussion revolves around the pervasive narrative that Artificial Intelligence (AI) is the primary driver sustaining the stock market. They explore the nuances of this claim, the interplay between narratives and fundamental economic factors, and the potential risks and opportunities presented by AI advancements.

The Role of AI in the Stock Market

AI: Savior or Storyteller?

Alex kicks off the discussion by challenging the popular belief that AI is the sole force propping up the stock market. Tom Lee provides a balanced view:

"It's true and it's not true... Not 100% of tech spend is AI. A lot of it is maintenance capex and expansion capex and the catch up for spending that's been deferred because of COVID et cetera."
(00:30)

Lee emphasizes that while AI contributes significantly, other sectors like financials, banks, and industrials are also driving earnings growth. He notes that much of the capital expenditure by major tech firms is not exclusively for AI but also for sustaining and expanding their operations.

AI as a Narrative Driver

Lee further explains that AI serves as a compelling narrative, especially in the U.S. and China, two primary hubs of AI innovation. However, he clarifies that narrative alone doesn't equate to AI driving the market:

"But that's different in my opinion than AI is driving the stock market. It's driving the narrative, but it's not necessarily driving the market."
(01:56)

Narrative vs. Fundamentals

The Power of Storytelling in Stocks

Alex probes into the extent to which narratives versus fundamentals influence the stock market. Lee delineates the two valuation methods:

"One is the underlying earnings and the second is the expectations of either how good the existing numbers are or how much they can grow... The narrative part is essentially valuation."
(02:16)

He posits that narratives often have a more substantial impact on stock prices than earnings alone in the intermediate term. Using examples like Tesla and Palantir, Lee illustrates how compelling stories can lead to significantly higher valuations that aren't directly tied to current earnings.

"I believe Tesla and Palantir... are proof that money is not how you measure the value of a stock."
(03:47)

Beyond Earnings: Trust and Business Models

Lee argues that a company's value extends beyond its financial metrics to encompass customer trust and the robustness of its business model. This trust allows companies to command higher Price-to-Earnings (PE) ratios despite comparable earnings.

The Resilience of the Stock Market Amid Black Swan Events

Navigating Unprecedented Challenges

The conversation shifts to the stock market's resilience in the face of multiple black swan events since 2020, including COVID-19, inflation surges, and geopolitical tensions like the Iran strikes. Lee highlights how these events, which historically should have triggered significant downturns, instead saw the market maintain or even grow:

"All of these have actually led to a sustained bear market."
(09:27)

However, Lee points out that factors like AI narratives and improved earnings across various sectors have mitigated the negative impacts of these events.

Supply Chain Sensitivity

A recurring theme is the stock market's sensitivity to supply chain dynamics. Lee explains that despite the U.S. being predominantly a services economy, manufacturing and supply chains remain crucial to the S&P 500's performance.

"Technology is a manufacturing economy because you have to turn things into silicon and then build data centers."
(09:56)

Potential AI-Related Black Swan Scenarios

AI’s Dual-Edged Sword

Lee explores two primary black swan scenarios related to AI:

1. AI Overreach:
   AI could render human labor obsolete by outperforming humans in virtually all tasks, leading to societal upheaval.

   "AI could create PhD level workers at a cost that breaks all economic models."
   (14:00)

2. AI Bubble Burst:
   Similar to the wireless and internet bubbles, the AI sector may experience a significant correction after a period of exponential growth, leading to consolidation and the emergence of dominant players.

   "The AI story is everything's going to peak at the same time probably 1/3 into the cycle."
   (16:41)

Societal Implications

Lee delves into the profound societal changes that could result from AI advancements, such as redefining work, achievement, and the role of money in society.

"Money may stop mattering... the consequences, money may stop mattering."
(26:08)

The Granny Shots ETF

Thematic Investing Explained

Tom Lee introduces the Granny Shots ETF (G, R, N, Y), a portfolio designed around seven key market themes, including AI. The ETF aims to outperform the S&P 500 by focusing on the most influential sectors driving market performance.

"Granny Shots was originally a research portfolio for six years before we launched... it ranks as top 3 percentile since the April low."
(52:12)

Lee explains that by identifying and investing in stocks linked to these critical themes, the ETF has achieved superior returns, exemplifying the effectiveness of thematic investing.

The Future of Bitcoin and Crypto

Bitcoin’s Exponential Growth Potential

Shifting gears, Lee discusses the future of Bitcoin, asserting that its utility will rise exponentially over the next decade. He attributes Bitcoin's increase to its growing acceptance as a network value asset and its integration into financial systems.

"Bitcoin's utility is going to go up exponentially in the next 10 years."
(56:02)

Stablecoins as Financial Services

Lee highlights stablecoins as a transformative application of blockchain technology, enhancing financial services by enabling more efficient and profitable transactions.

"Stablecoins is the killer app... they own twice as much as Germany, for instance."
(57:59)

Regulatory and Strategic Adoption

With decreasing regulatory burdens and increasing institutional adoption, Bitcoin and stablecoins are poised to secure significant roles in the global financial landscape.

"Bitcoin anchors everything because you don't need a stablecoin unless you had bitcoin."
(59:00)

Conclusion

The episode concludes with a forward-looking perspective on AI, the stock market, and cryptocurrency. Tom Lee emphasizes the importance of understanding underlying market themes and narratives, rather than solely relying on traditional financial metrics. He underscores the potential risks and rewards that AI and blockchain technologies present, advocating for strategic investments that align with evolving market dynamics.

"If you know the most important themes anchoring ideas, you can outperform."
(54:25)

Alex and Tom express enthusiasm for future discussions, including upcoming webinars and continued exploration of these critical technological and financial trends.

Note: This summary is for informational purposes only and does not constitute investment advice. Please consult a financial professional before making any investment decisions.