Fundstrat’s Tom Lee believes that the Federal Reserve will not attempt to curb artificial intelligence expansion, yet recent Federal Open Market Committee (FOMC) minutes indicate that AI investments are actively driving up inflation and tech stocks are positioned to deliver ‘big beats’ during earnings.
Lee’s Bullish Market Outlook
During a CNBC interview on Wednesday, Lee said that the Fed does not view AI as an inflation driver. Lee stated he was “happy to hear him say that he didn’t think AI growth is necessarily inflationary.”
Looking ahead to upcoming tech earnings, Lee argued that the central bank’s stance paves the way for market gains. “I think you’re going to be in a position to say big beats are great because the Fed’s not going to try to slow AI growth,” Lee said.
He added that investors can now evaluate tech performance under the premise that “good news is good news.”
Fed Records Show Inflation Pressure
Despite Lee’s assertions, the Federal Reserve’s official records present a contrasting economic reality. The FOMC minutes from Sept. 15-16, 2026, explicitly state that “surging AI-related investments were contributing to inflation pressures.”
The minutes further detail that recent consumer price increases were partly driven by “an increase in technology-related consumer goods prices associated with the AI buildout.”
Fed officials also expressed concern that this “AI buildout could cause aggregate demand to outpace aggregate supply over the medium term, putting upward pressure on inflation”.
During his Oct. 28, press conference, Chairman Kevin Warsh noted that “inflation remains elevated.” Warsh highlighted that “high-tech investment is leading the acceleration” in capital expenditures, stating that “these trends bear watching.”
Tech Earnings Anticipation
Trivariate’s Adam Parker supported Lee’s market optimism during the CNBC segment, noting that “the earnings power and cash flows of these businesses are going to be pretty good.”
Parker advised against being underweight on major tech stocks, adding that he expects them to grow faster than the broader market for the next several years.
How Has the Stock Market Performed?
The S&P 500 index has advanced 13.13% year-to-date. Similarly, the Nasdaq Composite index was up 14.23%, and the Dow Jones gained 9.18% YTD.
On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed higher. SPY rose 0.34% to $772.31, while QQQ advanced 0.60% to $725.61. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.27% higher at $524.68.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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