Tom Lee and Dan Ives Explain Everything
The Compound and Friends
In this episode of The Compound and Friends, hosts Downtown Josh Brown and Michael Batnick welcome Dan Ives and Tom Lee to discuss the current
Key takeaways
- Despite widespread macroeconomic concerns, corporate earnings have remained strong, supporting market resilience.
- The AI boom is driving massive capex, particularly in data centers and semiconductors, creating long-term investment opportunities.
Main topics
- Market resilience amid high interest rates
- AI capital expenditure and data center boom
Notable quotes
"I think this is setting up for a really bullish moment because we know pessimism is high and we know earnings are in good shape." – Tom Lee
Conclusion
Despite macro risks, AI uncertainty, and sector volatility, the panel remains
Transcript preview
Speaker 4 (0:00) The energy in this room is outrageous. Anything you want to get off your chest before I start? Couldn't have scripted a better time for you to be on the show. It's crazy. It's kismet. Can you feel this right now? Speaker 5 (0:17) It's not always straightforward to translate those inputs into what the stock price is going to move. Speaker 3 (0:23) 100%. It's not binary. And that's my speech. And then six months Speaker 4 (0:27) later, the market crashes. And then Speaker 1 (0:28) leave that aside. Speaker 1 (0:32) I think we could stop paying taxes because the robots are the ones that are taxed. And then what? It's Speaker 5 (0:38) almost like asking me in 1996 whether or not we're going to be in a bubble in 2000. If Speaker 1 (0:43) half the stocks can't even keep up with treasuries, there's something similar here. Speaker 5 (0:46) This is the trick, I think, of investing, that when you study history, you understand all the risks, all the headlines, all the problems that can go wrong, and your downside risk is, well, what if they don't? You know Speaker 4 (0:58) who buys this shit? I only like the beginnings of things. I like when a rally Speaker 5 (1:02) feels like it's in the face of challenges. Very Speaker 4 (1:06) confident in my assertions. Speaker 1 (1:07) This just shows, like, kind of like the evolution of how an economy goes. Speaker 5 (1:11) I have had so many friends kill their careers buying new loads. Pay Speaker 4 (1:14) attention, because we will see this again. This is not like a one and done. This happens again Speaker 5 (1:20) and again and again. They'd be calling us up, like, what the f*** is going on? Speaker 4 (1:23) I don't know. Speaker 3 (1:26) The first go-round here was the most fun I had. Speaker 5 (1:28) I lived in silence for most of my career. And you guys were the first place where I went. And it's certainly been fun to be on the show with you guys. You're the best. Speaker 4 (1:40) You're here to talk about stops. Give yourselves a round of applause. Let's hear it. This is what I want to do on my vacation. Speaker 5 (1:49) I Speaker 4 (1:49) want to Speaker 5 (1:49) talk Speaker 4 (1:50) stops. Speaker 4 (1:53) This podcast is brought to you by DBMF, the world's largest managed futures ETF. Feel like the world's changing fast? Sure do. Imagine a strategy built to Speaker 3 (2:02) move when everyone else is standing still. Going long or short across global markets is a trend shift. Speaker 4 (2:07) DBMF is made to move differently. A single low-cost ETF offering genuine diversification. even when stocks and bonds move together. Discover why DBMF's Speaker 3 (2:17) liquid, uncorrelated managed future strategy could be what your alts allocation is missing at www.dbmf.com slash TCF. DBMF made to move differently. The IMGP DBI managed future strategy ETF's investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company. It may be obtained by visiting www.imgp.com. The fund is distributed by Speaker 4 (2:45) Alps Distributors, Inc. DBMF is the world's largest managed futures ETF as of July 31st, 2026, with 4.16 billion AUM. Speaker 3 (2:57) Today's show is also brought to you by Janice Henderson. At Janice Henderson Investors, we believe working together is the way to work better. Like combining your portfolio plans and our in-depth strategy, your valued assets and our valuable insights, your mission and our vision. Always working in perfect harmony to find the right investment opportunities. Janice Henderson Investors, investing in a brighter future together. Visit JaniceHenderson.com. Speaker 4 (3:40) Let's go. Good job, queen. Speaker 4 (3:52) I gotta tell you, you guys are literally the best podcast audience and fans in the world. Give yourselves one more round of applause. Thank you guys so much. Speaker 4 (4:05) Thank you. I appreciate it. I'm working hard on the hair. All right. You guys, for those of you who don't know, this is one of, if not the top investing podcast in the world. Thanks to you, all of your efforts in sharing and liking and telling your friends and tuning in each week. And we love you for it. We are so lucky today to have two of the all time great guests that we have ever had on the show. Repeat guests. The fans ask for them all the time. Every time they come on, the show does ridiculous numbers. Ladies and gentlemen, please say hello. Dan Ives is a partner and senior managing director at Yorkville Ives & Co., the merchant bank he co-founded in July with Yorkville Securities, which combines investment banking, equity research, institutional trading, and principal investments. with a focus on AI. Most of you know Dan from his prior eight years as global head of tech research at Wedbush. Give it up for Dan. Speaker 4 (5:16) celebrating the 12th anniversary today of the founding of Fundstrat. We have Tom Lee, co-founder and head of research, chief investment officer at Fundstrat Capital, where he's also lead portfolio manager of the Granny Shots ETF suite. Welcome to Tom. Speaker 4 (5:43) Guys, I'm super excited to be here with you all today. I think there are some major topics that have roiled the, let's call it the commentary layer of the markets and have worked their way into prices as well. The first place I want to start. Speaker 4 (6:02) We should definitely talk about the macro situation. We have a Fed meeting on tap. The market is now convinced we'll get a 25 basis point rate hike based on the options market, a futures market at least. In the interim, we've got the heads of some of the largest AI companies and the president of the United States in open disagreement about the danger or safety of this technology. It is one of the biggest capex waves in dollar terms, the biggest in the history of the United States. It seems like it's a pretty major macro moment. Tom, let's start with you. Where do you think we stand? How should we be thinking about what's happening here? Speaker 1 (6:46) There is a wall of worry that you're describing and prices have reacted, especially the rate hike, because obviously nobody likes a Fed to tighten. But I think this is setting up for a really bullish moment because we know pessimism is high and we know earnings are in good shape. And if the Fed delivers the hike, which, you know, is like a 90 percent probability, it probably takes out future hikes because the markets relieve the Fed's doing something. So I think the probability of a massive rally starting tomorrow is really high tomorrow. OK, Speaker 3 (7:22) so what time? Yeah. Speaker 1 (7:26) 215. Speaker 1 (7:28) Tom, I- You're welcome. Maybe 2.16 after Warsh says, I hiked. I hear by hike. Hiked on Speaker 3 (7:34) a hill, you know. So Tom, the bears have been chirping for a while as they do. And I don't like to mock or poke because that's just karma asking for it. So I don't like to do that. But zooming out to where we are today, these are all of the challenges that's been thrown at the market. Starting with the Strait of Hormuz being closed and continuing to be closed with oil spiking. That was supposed to be a black swan event. equities look past it as earnings expectations kept rising and delivering uh still tariffs persistent inflation uh you had the ai situational awareness unwind the 10-year at 5 the fed hiking housing market is still shut down um and now frontier ai models talking about the slowdown over the weekend as you mentioned dan people were expecting armageddon well guess what semis which were, I guess, the only thing holding up the market. Not true. But they're now in a 20 % drawdown, 19%. So you got that. And yet, despite all of this and pessimism, the S &P is 2.6 % off of its all-time high. How can this be viewed? How can this be viewed as anything other than incredibly bullish? Am Speaker 4 (8:50) I an idiot? Is Speaker 1 (8:51) the Speaker 4 (8:51) market bulletproof given all of those bullets that have been fired at it? Speaker 1 (8:55) Yeah, I think what people forget is people tend to look at the stock market as, oh, it's up a lot from five years ago. And a lot of people just bought it without thinking. But they're not thinking about companies are using technology. They adapted to all those black swans and cut costs. And this year, earnings are up 25 percent and the market's only up 10. So the market got cheaper. And I think that's the perspective is that, you know, we're trusting our money with these CEOs that are proven that they're blue chip because they're not just sitting and telling the board everything's fine. They're like in crisis mode and cutting costs all the time. Speaker 4 (9:34) Dan, your coverage universe has stocks in it that, frankly, have announced some of the most insanely profitable quarters in American history, not just over the last three years, but just the last quarter. quarter alone. The superlatives don't even do justice to the magnitude of how much money companies are making. And yet, to Tom's point, valuations are actually contracting. What are you telling people that ask you about that? Speaker 2 (10:05) Well, for the first time in 30 years, the U.S. is way ahead of China when it comes to tech. And that's something in this AI revolution that, and we'll go into the anthropic issue in a second, but That is something that's still underestimated by investors. Demand to supply right now for chips is called 13 to 1. 13 to 1. There are Speaker 4 (10:30) 13 orders for every one chip that can be produced. Speaker 2 (10:34) And that's why a lot of times the bears from the 14th floor of the New York City office building talk about negative valuation. But when you see in Taiwan, you see in Korea like we do, what's actually happening. You know, you're not going to have true equilibrium probably till early 2029 at this pace. And for every dollar spent on CapEx, there's a five to six dollar multiplier cross arrest attack. That's why I look at software, look at infrastructure, look at cybersecurity. And it's just a very important moment that to Tom's point, I think investors are underestimating earnings by probably 25, 30 percent next few years. It sounds Speaker 4 (11:15) crazy to say we're underestimating earnings. but that actually has been the story of the last few quarters. The numbers are coming in so far ahead of what anyone expected. And it's not just happening in five or six companies. It's a phenomenon that I think most of the NASDAQ 100, a lot of the S &P 500 by market cap, how sustainable is that? Is the reason we're seeing contracting valuations because people look at it and say, too hot, too good to be true. No way this can Speaker 2 (11:47) continue. When I think memory stocks are kind of front and center there, if you look at Micron, in terms of where these stocks are trading. But ultimately, quarter by quarter, these companies are going to continue to prove out that this is, we still believe this bull market's young. I mean, we're going to have a multi-year tech bull market ahead of us. And we'll go through white knuckle moments like this weekend or circular financing or whatever it may be. macro issues, oil, whatever you want. But it comes down to tech is going to lead this market higher because of where the spending is. You have 12 to 1500 data centers that are going to be built in the next five or six years. Even if you assume politicalization, 10%, 15 % get voted down. That is just starting in terms of an innovation boom that's happening in this country. Speaker 1 (12:37) Tom, do you think it's as early as Dan seems to? Well, you know, you're never at a top when people want PE to be low and earnings are going up unless it's a true deep cyclical. And, you know, the U.S. economy is the opposite of a deep cyclical sector, right? Like we are kind of a low volatility economy now. So the multiple should be going up a lot. Tom, I know that Speaker 3 (13:00) we are all very excited for the bull market to resume tomorrow. 2.15. Speaker 4 (13:06) Can't wait. Speaker 3 (13:07) At 2.16. But what do you think is the most legitimate, the most credible bear case that you hear? Speaker 1 (13:17) Well, I think two things will kill a bull market. One is a bona fide bubble. And a bubble could happen if one day everyone says there's only one AI model we want to use. And then like CapEx goes to zero. But the other is monetary policy intervention. The Fed. 80 % of the time is the reason a bull market ends. So I think if the Fed genuinely felt the economy was overheated and inflation pressures were unhinged and there was risk of a debt bubble, they would pull the switch. So with that in mind, we do Speaker 4 (13:59) have, I wouldn't say record debt issuance, but higher debt