by Dr. Chris Kacher
AI resets valuations
AI is accelerating disruption so rapidly that it will violently reset how we price risk and growth. Traditional company valuations — especially for tech and growth stocks — rest on a flawed assumption that is about to break.
In standard Discounted Cash Flow (DCF) models, 60–80% (often more for high-growth tech names) of a stock’s value comes from “terminal value” — the assumption of durable competitive moats generating perpetual cash flows far into the future. AI destroys that assumption. It makes every moat temporary. Software, services, and business models can now be disrupted or commoditized at near-zero marginal cost and blinding speed.
As a result, companies and investors can no longer credibly forecast or price long-term earnings. The terminal value component of valuations becomes unreliable or collapses entirely. Growth investing as we know it gets heavily devalued or dies.
For context: the S&P 500 currently sits at roughly $58 trillion market cap with annual free cash flow around $2.8 trillion. It trades at ~22x earnings, with many top tech stocks at 30–60x. In a terminal-value collapse scenario, valuations would compress sharply toward near-term free cash flow using far lower multiples (2x–7x FCF). At a midpoint of ~5x FCF, the S&P 500 would be worth only about $14 trillion — implying a ~75% drawdown from current levels.
This is the core of Chamath Palihapitiya's warning.
Global liquidity
Global liquidity is the dominant driver of asset prices, according to Michael Howell ("The Liquidity King") and Raoul Pal. Both view central bank balance sheets, M2, cross-border flows, and massive sovereign debt refinancing as far more important than earnings or AI hype. They agree we’re in a structural era of monetary inflation and currency debasement, which long-term favors gold as a store of value and Bitcoin as its superior, compounding counterpart.
The key split is timing. Howell sees the 2023–2025 liquidity expansion peaking or reversing this year, with real economic growth siphoning liquidity out of financial markets and creating near-term headwinds for risk assets. Pal is more bullish, arguing liquidity has only been delayed and a major $7–10 trillion injection is coming in 2026 to refinance debt, likely extending the bull cycle into the second half with Bitcoin playing catch-up. This macro backdrop tempers pure AI optimism and adds weight to potential S&P repricing risks.
That said, Bitcoin has entered into a new era of institutional maturity. As major players such as BlackRock and sophisticated trading algorithms gain control, price volatility is expected to compress. Bitcoin will trade in more professional and contained ranges in the coming years while institutions harvest steady returns. These institutions can generate reliable 10 to 15 percent annualized returns through strategies including basis trading, options selling, and yield generation. This dynamic keeps Bitcoin trading in tighter ranges with lower highs and higher lows rather than the extreme swings of prior cycles.
In the near to medium term (2026 to 2028), ETF inflows and deeper liquidity will act as structural support. Daily and weekly moves should moderate to 20 to 40 percent intra-year ranges. New all-time highs remain possible, but advances will feel more gradual and range-bound than in previous bull markets as we have seen over the last two years.Over the longer term, the fundamental tailwind of ongoing fiat currency degradation remains intact. Persistent inflation, expanding sovereign debt, and central bank money printing continue to erode the purchasing power of traditional currencies. Bitcoin’s fixed supply of 21 million coins positions it as the hardest store of value ever created. Once institutional capital is locked in via ETFs, corporate treasuries, and sovereign allocations, this scarcity dynamic will drive prices materially higher.
Key risks include prolonged high interest rates or regulatory setbacks that slow adoption. However, these factors are unlikely to alter the multi-year upward trajectory due to the relentless erosion of fiat.