Tom Lee: Still a good risk-reward balance in equities, even in the stocks leading the rally

• Risk-reward in the market remains positive, even for leading stocks like semiconductors, which are not yet 'expensive' despite recent gains (forward P/E of semi index is 22x, previously 35x).
• AI is projected to add 2 percentage points to US GDP annually for the next five years, contributing 6% to S&P earnings growth without inflation.
• A significant amount of retail investor capital is still on the sidelines, potentially fueling further market moves.
• Anticipates a 15-20% market drawdown later this year, triggered by a new Fed testing different inflation theories and developing shortages in petroleum products.
• Despite short-term turbulence, the long-term outlook remains bullish, with 2027 potentially seeing one of the biggest rallies in a lifetime.

Tom Lee maintains a positive risk-reward outlook for equities, driven by strong earnings and the scarcity of compute/supply chain components like semiconductors. He highlights AI's potential to add significant GDP and S&P earnings growth without inflation, making him bullish on the long-term. However, he anticipates a 15-20% market drawdown later this year due to an incoming Fed chair and potential petroleum shortages.