Tom Lee and Digital Paradoxes: How to Navigate the Crypto Storm and AI Risks in 2026

February’s SoFi platform podcast brought together two prominent voices in the financial world — Tom Lee from Fundstrat and author Michael Lewis — for an in-depth discussion about what’s really happening in the markets. Their conversation dispels several popular myths about technology, investing, and risk, offering analytical insights that go beyond typical bubble and crash narratives.

Performance over drama: how to correctly interpret AI signals

Tom Lee emphasizes a critical mistake in analyzing current AI developments. When we see software stocks drop 40-50% from their highs, most investors interpret this as a warning signal. But data tells a different story.

Reducing company software expenses isn’t a disaster for producers — it’s cost optimization. When unemployment among college graduates is even higher than among those without higher education, it’s not just “bad news” headlines. It’s a sign that economic productivity is increasing — more output is produced with fewer workers.

Lee uncovers a paradox often overlooked. The true bubble isn’t when everyone talks about it — it’s when everyone says “it’s not a bubble at all.” The caution with which the market currently approaches AI actually guarantees we’re still in early stages of real transformation, not on the brink of collapse.

Individual investors as a revolutionary force

One of Fundstrat’s most surprising findings is the consistent advantage of retail investors over institutional funds. Tom Lee surveys his clients monthly about the most promising stocks, and since 2019, results show a pattern: ordinary people’s choices are more accurate.

The reason lies in different motivations. Institutional investors operate on 30-day horizons, some hedge funds hold positions for only 40 seconds. In contrast, retail investors invest their own money — “permanent capital” — and are willing to wait 2-3 years. They seek genuine long-term potential, not short-term gains.

The paradox plays out in reality. Palantir, Tesla, Netflix — these were battlegrounds where retail investors steadily bought, while institutions shorted. When prices hit critical points, overvaluation triggers a sudden jump. Netflix in the mid-2000s, when it was worth $2-4, was a similar “buy” opportunity. Lee considers launching an ETF that invests in the favorite stocks of retail investors — “professionally validated WallStreetBets” with real data from paid users, not Reddit bots.

Gold as insurance against human uncertainty

Michael Lewis recounts his incredible investment journey into gold — initially thinking it was madness. A friend told him about Roman emperors secretly devaluing money by reducing silver content in coins. That historical lesson led Lewis to conclude: gold isn’t just an asset, it’s insurance against fear.

“When I own gold, I’m actually investing in fear,” Lewis explains. It’s hedging current uncertainty: political instability, economic crises, potential financial collapse. Gold as the “Lindy effect” — the longer something exists, the more humanity believes in its value.

Tom Lee offers a cold calculation of its worth. The market capitalization of all gold on Earth is about $35 trillion. The total market cap of the S&P 500 (excluding seven tech giants) is around $40 trillion. The gold market has practically reached the size of the stock index, indicating massive capital shifts.

But Lee identifies real “black swans” for gold: underground reserves are millions of times greater than what we mine; if prices rise enough, mining becomes more profitable than any other industry. Asteroids with gold that SpaceX might someday explore. Even alchemy — if someone secretly discovers a way to turn lead into gold by changing atomic structures.

Based on 100 years of research, Lee finds a threshold: the market cap of gold could reach a maximum of 150% of the stock market’s capitalization. Historical data shows gold has surged more than 9% in a single day only three times — and all three times marked price peaks. If history is a guide, gold is already near its peak.

Quantum computers and cryptocurrency vulnerability

Lee names the real risks to the crypto ecosystem. The current 40-50% drop in Bitcoin from its highs is the seventh such event, but only the third “crypto winter” with a 90% decline.

The real threat is quantum computing, which could break cryptographic algorithms. If quantum advantage becomes commercially viable — especially if China already possesses it — about a quarter of Bitcoin wallets could be compromised. The Satoshi Nakamoto wallet has never been updated — a historical asset left vulnerable.

The second risk is AI. The current narrative suggests AI will perform microtransactions in the real world, using blockchain for verification. But if AI becomes sufficiently intelligent, it could launch its own blockchains. Public blockchains might become obsolete if AI develops its own currency system to verify its transactions.

Lee notes this isn’t a full “winter” for crypto — more like a “storm.” Daily Ethereum transaction activity is exponentially increasing due to tokenization. Wall Street has begun entering the crypto sphere. The decline started after news of tariffs on China on October 10, leading to a series of reactions to reduce leverage. This impact was even greater than the FTX crash in November 2022.

The Fed under new pressure: back to activism?

Kevin Warsh’s nomination as Fed Chair raises radical questions. Warsh previously argued that the Fed’s ability to help the economy is limited. If the White House truly aims to limit the central bank’s role, it could mean increased influence of fiscal policy — direct interventions by the Treasury.

But Lewis sees a deeper paradox. The Trump administration constantly promotes “government disinterestedness” and cuts agencies. Yet it intervenes in markets through state influence, choosing winners and losers in ways modern democracies wouldn’t dare. This is cognitive dissonance in politics.

If a crisis caused by AI truly occurs — a key AI company collapses or a chain breaks — the government won’t wait for stories of central bank independence. Lee believes AI companies will be nationalized. Over the next decade, the country controlling AI and its ecosystem could become a global superpower. The Defense Department is already modeling scenarios: how to buy NVIDIA, how to evacuate enough specialists from Taiwan to restore TSMC manufacturing in the US.

Sports betting and prediction markets: a new frontier of speculation

A new wave of speculative assets — from sports betting to prediction markets — is changing the landscape. Polymarket in 2024 predicted US election results in 50 states more accurately than expert Nate Silver. Lee uses aggregated data from prediction markets as the closest thing to a “crystal ball.”

But Lewis raises a high red flag. Legalized sports betting hasn’t made the market more rational — it’s created new sources of dysfunction. College athletes don’t earn income, yet huge bets are placed on matches. One player can influence the outcome — leading to scandals of manipulation. Prediction markets are gradually replacing FanDuel and DraftKings, becoming commodity exchanges outside government regulation.

However, these innovations increase speculative activity. Since 1974, about 40,000 companies have gone public or split. 90% lost more than half their stock value. Of those that fell more than 50%, again 90% eventually went to zero. In other words, most stocks ultimately become worthless — the essence of capitalism.

Wall Street has changed, but human nature remains

Lewis observes the evolution of the financial sector through his daughter, who works on Wall Street. Once a world of shouting, human connections, and daring. Now it’s quantum algorithms and automated trading. People sit at computers, watching robots.

But the instinct remains unchanged: “I want to earn more and faster than others” — the main driver of the industry, whether it’s shouting on trading floors or launching AI algorithms. Greed as a constant of human nature.

The difference lies in talent attraction. In Lewis’s father’s generation, people with average grades — good communicators — went to Wall Street. The smartest chose other careers. But as finance started generating huge profits, it became a magnet for elites. Half of graduates from prestigious universities now want a career in finance. Today, competition is much fiercer — first-year students already prepare for Wall Street.

Yet paradoxically, talented people are now attracted to Silicon Valley. Most capital there comes from financiers via venture funding. Quantum analysts, once rare, now dominate everywhere, but the financial sector’s share of the economy continues to grow, not shrink.

Digitalization blurs the lines between the real sector and finance. Over the past 20 years, 50% of GDP growth has come from the digital economy. The boundaries between money, services, and digital assets are becoming fuzzy. JPMorgan Chase is transforming into a tech-like company, a provider of market services rather than just a lender.

Conclusion: prepare for the unexpected

Lee and Lewis reveal a world where traditional categories no longer apply. AI may not necessarily bring overall market gains despite its revolutionary potential. Gold could lose value if asteroids are mined from space. Cryptocurrencies might become obsolete if smart AI launches its own systems. The Fed could lose independence amid geopolitical challenges.

The only constant is human greed, which takes new forms but remains the driving force. Individual investors outperform institutions. Fear remains the strongest motivator for buying insurance like gold. History repeats itself, but each time it seems more extreme.

Lee reminds us: the real bubble occurs when no one talks about it anymore. Right now, everyone is cautious, all discussing risks. This could mean the most remarkable gains are still ahead.