Source: Purpose Investments; Compiled by: BitpushNews
It's that time of year again, and we've gathered product leaders and fund managers to review the market performance of 2025 and look ahead to the next 12 months.
This year, two main themes have been present: despite continued volatility, the institutional viability of digital assets continues to grow; meanwhile, big tech stocks have consistently been at the heart of market discussions. With these thoughts in mind, we interviewed Paul Pincente, Vice President of Digital Assets at Purpose Investments, and fund manager Nick Mersch to discuss the dramatic changes of the past year and potential future trends.
Will the AI hype continue to create miracles in 2026, or will investors face disappointment after excessive hype?
Nick Mersch (Fund Manager)'s View: In my opinion, the AI hype is the most dazzling decoration on the "Christmas tree" of the market in 2025. More importantly, it's no longer just a spark. Now, real revenue, real workloads, and tangible budget projects are flowing steadily into AI. While hyperscalers are aggressively investing in capacity, this is increasingly matching the needs of enterprises moving from pilot phases to full production. Customer support, code assistance, advertising, data analytics, and internal productivity tools are all beginning to show measurable benefits. This is key to transforming capital expenditures (CapEx) from a gamble into long-term annuity income. Yes, the scale of investment is staggering, from hundreds of billions of dollars in capital expenditure plans to massive electricity purchases. But this may also be building a foundational layer of computing power and energy that the entire economy may rely on for the next decade or even longer. Every new model, agent, and application launched in 2026 will require a runtime environment, and platforms that built capacity early will be the first to capture these expenditures. AI is more like a multi-year wave of infrastructure and productivity growth than a short-lived frenzy. Is there a bubble risk in individual stocks? Absolutely. Some stocks are priced not only to reflect perfect expectations, but even to an absurd degree. But this is not the same as saying the entire AI cycle is a mirage. In 2026, investors have the opportunity to participate in this long-term trend while maintaining cautious exposure. We advocate focusing on companies with the following characteristics: a clear monetization path; the ability to convert AI capital expenditures into recurring revenue and cash flow; and control over key aspects such as computing power, networks, energy, or distribution. In my opinion, the magic hasn't disappeared; it's just shifting from "storytelling" to "execution," which will ultimately benefit disciplined stock pickers. For the cryptocurrency world, the volatility at the end of 2025 was like a sled gliding across a half-frozen gravel road. Will the journey in 2026 be smoother? Paul Pincente (VP of Digital Assets) says: First, this sense of turbulence isn't your imagination, and you're not alone in feeling nervous. Cryptocurrency has always been like that kind of passenger: one side insists the road is fine, while your teeth chatter like an overactive imaginary bird. But a rough road doesn't equate to a broken carriage. In my view, this year-end turmoil is less a solemn funeral bell and more a routine, albeit slightly dramatic, "housekeeping" exercise in the high-beta asset class. After a strong rally, excess leverage must be deflated, bubbles must be deflated, and the boldest narratives must be tested in the cold light of real positions. This is the season when the market forces confidence to "show its receipt." So, will 2026 be smooth sailing? We should use that word with caution. Cryptocurrencies are not calm lakes, but turbulent, bifurcated rivers. However, I do think its volatility may become more mature. Not docile, but more comprehensible. This could mean fewer "system crash" headlines and more recognizable risk asset rhythms. Furthermore, there is a practical reason to remain optimistic. If macroeconomic conditions allow for a more supportive policy stance, and inflation performs well enough to avoid triggering new policy panics, risk appetite typically tends to revert to its previous pattern. When it does, cryptocurrencies rarely tiptoe back into the room; instead, they burst in like a band being asked for an encore. So, yes, we believe you can anticipate drama, tension, and the market turning the over-leveraged into cowards and the patient into philosophers. But we don't think you should mistake a bumpy December for a doomed decade. Sometimes, bumps are simply the price of a better path. Tech stock valuations have been shining like high-end shop windows. Are they sustainable, or will the chill of reality freeze the industry? Nick Mersch's View: Tech stocks are indeed in full-blown "holiday window" mode in 2025, but beneath the glitter, we believe there's more substance than pessimists acknowledge. Earnings revisions for key AI beneficiaries are generally trending upward, with improved margins as cloud and software scale, and many balance sheets remaining net cash or low leverage. I believe we are witnessing the largest capital expenditure cycle in tech history, with hyperscale service providers guiding annual AI spending of tens of billions of dollars. However, their starting point is dominant market position and a strong cash flow engine, which may provide a greater buffer than in past cycles. The key difference in 2026 is whether this glitter is supported by fundamentals or merely a speculative glimmer of hope. I believe some software and smaller AI stocks are significantly overvalued relative to current earnings. However, in core infrastructure, cloud services, and certain platform companies, valuations appear more "high but deserved" than purely speculative. Rather than framing it as a binary "bubble or no-bubble" debate, we believe investors can view 2026 as a filter. Companies demonstrating significant operating leverage in their AI investments and rising marginal returns on capital will be able to maintain or even expand their valuation premiums. Those that merely talk about gigawatts (GW) and GPUs without a roadmap for unit economics may be most vulnerable when the downturn arrives. We believe the shine can continue, provided there are earnings to support it. With ETF, regulatory, and institutional inflows finally on track, is cryptocurrency ready to hit the "adult table" this holiday season? Paul Pincente's View: There's an interesting thing about markets: they usually grow in the most inconspicuous way. Not through fireworks, but through pipes; not through poetry, but through the slow calming of policy, filings, and institutional nerves. So, when someone asks if cryptocurrencies are ready to join the adult table, I hear a question asked in a tuxedo but with practical shoes on its feet. The "adult table" isn't reserved for the loudest believers, but for assets that don't require constantly inventing new rules. Investors want to know what the rules are, who enforces them, and where the exits are when the room gets crowded. The last point is crucial. Liquidity is always welcome on a sunny day; the real "adult test" begins when the weather turns cloudy. ETFs have helped, not because they've magically sanctified assets, but because they've translated assets into a language institutions already understand. Regulation, even if delayed, alleviates the famous excuse of "we're waiting for clarity." Custody and operational standards, though dry, have become the watershed between curiosity and actual allocation. The story doesn't end with Bitcoin. Stablecoins are quietly proving they're more than just convenient tools for cryptocurrencies; they're becoming the tracks for real-world payments. Tokenization is moving from pilot projects into the future, looking less like a marketing stunt and more like infrastructure. Will 2026 be more genteel? No. Cryptocurrencies still love grand entrances; they might dress in a sequined gown at the adults' table. But the seating arrangement has changed. The guest list now includes more rule-followers, more long-term allocators, and more capital that won't panic at the first sign of volatility. This is how a market becomes indestructible: not by becoming boring, but by becoming reliable enough to survive its own excitement. Are AI models stars on a Christmas tree or just cheap decorative gold bars? Nick Mersch's perspective: If the past three years have been about breakthroughs in models, then 2026 may evolve into a race to see what these models can actually do in the real world. Tech companies are shifting from a race to "build the biggest system" to a race to "deeply embed systems into workflows." This means agentic AI capable of handling multi-step tasks, multimodal systems that integrate text/images/audio/video, and vertically tuned products that understand industry-specific language. The opportunity lies not just in sophisticated demonstrations, but in lasting productivity gains across white-collar jobs. As we argued in July, the message for companies and investors is simple: adapt now or risk being left behind. We believe the winning organizations won't be those releasing the coolest models, but rather those quietly replacing manual processes with AI-first workflows, redesigning products around intelligent assistants, and building governance, security, and data quality pipelines. This is where high sticky revenue and higher switching costs come from. For investors, we believe this will shift the focus to the higher layers of the stack. Model providers remain important, but value is likely to increasingly concentrate in three areas: platforms for orchestrating models and agents; application vendors that deliver specific business outcomes, such as improved sales productivity or reduced support costs; and infrastructure and tools that enable secure, observable, and compliant deployments. In this world, the star at the top of the tree isn't the size of the model, but the customer impact. If a company can demonstrate shorter cycle times, fewer complaints, higher conversion rates, or lower unit costs due to AI, we believe the market will reward it. Otherwise, even the most dazzling ornament will eventually lose its luster.
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