Tom Lee: The Correction Is Over — Stocks Are About To Surge

Apple

Across the shows: 38 speakers in other episodes, 37 bullish and 30 bearish calls, past 30 days

• Patrick McGeeNeutral

  Apple's conservative holiday guidance should not be read as a sign of softening demand.

  Apple guided holiday-quarter revenue growth to 7-10%, below the 12% it just delivered and below what people expected. McGee says Apple has always been conservative, preferring to guide low and beat. He says the holiday quarter is the most important of the year, but he reads nothing into the guidance. He calls the quarter respectable, with services growing double digits, and says the stock's rise is remarkable for a company of its size and age.

  “Apple's a conservative company that would rather sort of put out a low number and then beat it out of the park. So I basically read nothing into that.”at 26:59

• Patrick McGeeUncertain

  iPhone Duo cracking looks like an early-production problem that may be fixed, but demand is unclear.

  McGee says the Duo's cracked-screen reports are mostly anecdotal from social media, so the true scale is unknown. The best case is an infant-mortality problem, where screens break within a day or two of use, which he suspects is more likely. He says Apple usually resolves such defects before shipping, so shipping early is the strange part. He says the problem may already be fixed at the supplier level and may amount to only a few dozen units. He adds that it is unclear whether demand for the $2,000 device is as strong as Apple says.

  “in the best case scenario, the problem of the iPhone Duo is an infant mortality problem. ... I suspect it's the former.”at 27:30

• Patrick McGeeBullish

  Apple's hardware-based on-device AI could win while rivals spend heavily on data-center capex.

  McGee argues Apple is behind in software and cloud AI, but its Mac minis and Mac studios can run open-weight models locally with no subscription fee to Claude or ChatGPT. Apple's chip work and on-device AI could let users run more models on their phones, even offline. That could lead to a narrower super-cycle of upgrades every two years. When markets panic over AI capex, Apple's safety-trade position looks genius, and investors in the cloud-AI race are not rewarding it.

  “As they continue to iterate on this technology, Apple could have a very, very winning AI strategy, but it's in hardware.”at 32:51

Invesco QQQ Trust (Nasdaq-100 ETF)

Across the shows: 1 speaker in other episodes, past 30 days

• Tom Lee · Fundstrat Global AdvisorsBullish

  Tech (the Nasdaq-100, 'triple Q') should rally at least 15% between now and year-end.

  Lee expects the tech-heavy Nasdaq-100 to rebound after its more-than-10% correction from the October peak. His support is the parallel with the earlier sell-off, when the Nasdaq fell 12% and was followed by a 15% rally. He sees the market in the same oversold position and believes the bottom is very likely in.

  “Technology, you know, the triple q, is gonna do at least a 15% rally between now and year end.”at 4:32

Anthropic

Across the shows: 85 speakers in other episodes, 106 bullish and 65 bearish calls, past 30 days

• Tom Lee · Fundstrat Global AdvisorsUncertain

  Anthropic's reported sequential growth is distorted by its revenue reporting, not weak organic growth.

  Ed Elson cited slowing growth, around 47-50% in the latest quarter and an expected 25% next quarter. Lee responds that the confusion comes from Anthropic's revenue policies. What observers consider subscriber, organic, or unit growth is not how the company reports revenue, which affects reported sequential growth. He expects Anthropic will learn this as it becomes a public company. He does not give a firm verdict on the underlying growth.

  “what you and I would consider, like, subscriber and organic and unit growth is not necessarily how they're reporting revenue. And so it affects the growth as sequential.”at 15:02

AI bubble & tech valuations

• Tom Lee · Fundstrat Global Advisors

  AI is not yet a bubble; it becomes one only when use cases lack real end markets.

  Lee compares AI with the Internet bubble, which was not a revenue story but a cost-savings story with no productivity metric. He argues AI is different because it is a pace of remarkable innovation that shows up as productivity, with revenue per worker rising. He calls circular financing ecosystem development, as seen in energy and early radio, where RCA invested in stations and programming. He says Nvidia has risen about 10x since ChatGPT compared with Cisco's 100x in the earlier cycle, so it is very early. The risk he flags is that AI becomes a bubble when people invent use cases with no end markets.

  “I think AI becomes a bubble when we start making up use cases that don't actually have end markets yet.”at 9:28

• Ed Elson · Prof G Media

  Apple looks expensive at 36x forward earnings given slower earnings growth than other big tech.

  Elson notes Apple has been up more than 20% this year and is outperforming other big tech names. He argues it is also very expensive, trading at 36 times forward earnings, the highest of big tech, even though its earnings are growing significantly slower. He suggests investors are relying on a big future project from Apple, but he doesn't see one in the Duo or Vision Pro.

  “It's also very expensive. It's trading at 36 times forward earnings, which is by far the most expensive of the big tech companies despite the fact that its earnings are growing significantly slower.”at 33:20

US elections & politics

• Tom Lee · Fundstrat Global Advisors

  A Democratic sweep would be favorable for markets; stocks have rallied after every midterm within 12 months.

  Lee conditions his view on prediction markets and polls showing a Democratic sweep, which he says is favorable for markets. He cites past cases where Republicans lost the House and Senate, with the S&P 500 rallying 13% into year-end and 33% over the next twelve months in 1954. He says markets have rallied over the following twelve months after every midterm, so he expects markets to be in relief mode. He also says a Democratic sweep would not stop data centers.

  “That's actually very favorable for markets. ... a 100% of the time, markets have rallied after midterms over the next twelve months.”at 18:25

• Ed Elson · Prof G Media

  Democrats will sweep the midterms, House and Senate, as a referendum on Trump.

  Elson argues the midterms will be a referendum on President Trump. He cites the cost-of-living crisis he attributes to tariffs, a war Trump said the US would never enter, a widening K-shaped economy, and corruption. He predicts a resounding vote of disapproval, a blue wave, and one of the largest congressional defeats in history. He admits he could look very wrong.

  “I believe the democrats are about to sweep. I think they will take the house and the senate.”at 37:31

Market sentiment, positioning & volatility

• Tom Lee · Fundstrat Global Advisors

  The explosion of zero-day options creates leveraged, myopic trading that drives short-term market swings.

  Lee argues that the growth of zero-day options is a form of short-term leverage, equivalent to margin trading. Because it is a highly levered bet, investors are using a very myopic time frame, probably about two weeks rather than twelve months. Institutions, which still account for about half of trading volume, have to respond to that. He says the market has therefore become short-term oriented, and quarterly earnings now feel like long-term news.

  “An explosion of zero day trading options, so short term uses of leverage... It's a highly levered bet, and therefore, investors are employing a very myopic time frame.”at 5:44

AI: overall outlook

• Tom Lee · Fundstrat Global Advisors

  AI token usage still shows Jevons paradox; slowing sequential growth won't end the cycle.

  Lee argues that exponential S-curve industries don't grow at the same rate every quarter. He cites Cisco in 1997, when growth fell from 20% sequential to 5% and the stock fell 50%, before it recovered to 18 a year later. He also cites mobile, which had multiple growth cycles and slowdowns before penetration continued for 30 years. He says people who think token-maxing signals the cycle's peak haven't studied prior cycles. The real test is whether AI stops delivering remarkable innovation, which would mark the end of the cycle.

  “growth, an exponential s curve industry doesn't grow at the same pace. I think token usage still has the Jevons paradox at work.”at 13:13

Frontier AI labs & model race

• Tom Lee · Fundstrat Global Advisors

  Frontier labs like OpenAI and Anthropic may not be the long-term winners; downstream firms may be.

  Lee draws on the Internet and mobile cycles, where the long-term winners were often second-wave downstream companies, not the frontier players. He compares OpenAI and Anthropic to Netscape and Cisco. He cites Netflix, eBay, Expedia, and Apple, which did better, with Apple not launching a product until 2007, well after the bubble burst. He says the result is still TBD, and that investors may need flexibility, since AI returns may not come through Anthropic or OpenAI but could come from a company like SpaceX or Apple.

  “OpenAI and Anthropic are the frontier companies. They're not that dissimilar to Netscape and, Cisco.”at 15:33

US stock market outlook

• Tom Lee · Fundstrat Global Advisors

  Correction is near its bottom; S&P 500 could reach 8,200-8,400 by year-end.

  Lee argues the market is in the same oversold position as after the earlier sell-off, when the Nasdaq fell 12% and then rallied about 15%. He notes memory stocks are down almost 50%, the AI trade is down more than 20%, and the Nasdaq is down 10%. He concludes the bottom is very likely in and the year-end rally will be stronger than he originally expected. He had earlier predicted an 8,000 S&P target after a fall correction, and says that is now about 5.5% above current levels.

  “I think we could be at 8,200, maybe even 8,400 by the end of the year. So I think we're gonna rally above what I thought originally.”at 17:35

AI infrastructure & data centers

• Tom Lee · Fundstrat Global Advisors

  Big Tech courting Democrats will make data centers politically acceptable, so AI buildout keeps growing.

  Lee acknowledges the risk that a Democratic sweep could bring anti-AI legislation. He argues Democrats will still support data centers because big tech companies will court Democratic senators, House members, and governors. The companies will make data centers good for local communities and state economics, and Democrats will shift to support that outcome. He concludes that AI will keep growing, though because the tech industry is courting the Democratic Party.

  “The reason I think Democrats will support data centers subsequently is, one, that the big tech companies are gonna court Democratic senators and house and governors.”at 19:00