A prominent strategist says the mechanics of one AI stock still resemble an early-stage rerating, comparing the setup to investors doubting Tesla (TSLA) before its breakout.
In a new CNBC interview, Fundstrat’s Tom Lee says rapid innovation pace and strong visibility on AI spending point to continued payoff, even as valuation fears linger.
Lee says market leadership remains anchored by tangible earnings power, challenging claims that AI heavyweights have entered speculative territory.
“Even though they may say AI stocks are expensive, Nvidia still only trades at 29 times forward earnings. I mean, it’s still cheaper than Costco, so it’s hardly a bubble valuation.”
He points to Palantir (PLTR) as a standout, calling it a rare “n=1” company that defies typical software multiples because of the transformative value it claims to deliver to customers.
“You’ve got a founder-led business, developing products that really seem like magic for the companies that adopt it. So, should this just be getting a software multiple? I don’t think so. And you know, Palantir is opening up so many markets. And if it were a venture capital firm, they’d be getting potential carry for how they transform businesses. So to me, I think that this is still a market discovering how to define the valuation model for Palantir. But to me, that doesn’t mean it’s a bubble.”
Lee says investors dismissing Palantir’s valuation are at risk of repeating history, likening current skepticism to early doubts about Tesla before it became one of the market’s most powerful compounders.
“People would have said that about Tesla in 2018 because it looked incredibly expensive. And the stock in Tesla has been a huge performer since then.”
He also highlights positioning dynamics that may force reluctant buyers back into the market, noting that underperformance pressure from fund managers is at historic levels.
“The S&P is up 80% over the past three years, and funds are measured on three-year performance. Only 21% of fund managers are beating. It is one of the worst-ever periods for fund managers.”
According to Lee, some managers may be hoping for a market pullback to close the performance gap, but seasonality and momentum indicate that the opposite outcome is more likely.
“I think what’s more likely, of course, is the market follows a seasonal pattern, which means there’s going to be a lot of chasing into year-end.”
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.