It’s that time of the year again, when we gather some of our product leaders and portfolio managers to reflect on 2025 and anticipate what the next 12 months have in store.
This year, two major themes emerged: digital assets continued to gain institutional viability despite ongoing volatility, while megacap Big Tech names consistently dominated the conversation. With that in mind, we quizzed Purpose Investments VP of Digital Assets Paul Pincente and Portfolio Manager Nick Mersch on what happened and what could be coming up
Is the AI boom set to keep delivering magic in 2026, or are investors risking a lump of coal from overhyped expectations?
In my opinion, the AI boom has been the brightest ornament on the 2025 market tree, and importantly, it’s no longer just a shiny object. You now have real revenue, real workloads, and real budget line items flowing into AI. Hyperscalers are spending aggressively on capacity, but this is increasingly being matched by demand from enterprises that are moving from pilots to production. Customer support, code assistance, advertising, data analytics, and internal productivity tools are all starting to show measurable gains. That is what turns CapEx from a gamble into an annuity.
Yes, the scale of investment is staggering, from multi-hundred-billion-dollar CapEx plans to massive power procurement. But this may also be building a foundational compute and energy layer that the economy could lean on for a decade or more. Every new model, agent, and application launched in 2026 will be looking for somewhere to run, and the platforms that built early capacity could be first in line to capture that spend. Rather than a one-year sugar high, AI is behaving more like a multi-year infrastructure and productivity wave.
Is there bubble risk in individual names? Absolutely. Some stocks are priced for perfection and then some. But that’s different from saying the entire AI cycle is a mirage. In 2026, investors may have the opportunity to lean into the secular trend while being picky about exposure. We believe in focusing on businesses that:
- have a line of sight to monetization,
- convert AI CapEx into recurring revenue and cash flow, and
- sit on critical choke points such as compute, networking, energy, or distribution.
In my opinion, the magic isn’t fading; it’s just shifting from story to execution, which could ultimately favour disciplined stock pickers.
– Nick Mersch, Portfolio Manager
For the crypto world, the end of 2025 has been bumpier than a sleigh going over half-frozen gravel. Will the ride be smoother in 2026?
First, you’re not imagining the bumps, and you’re not alone in gripping the reins a little tighter. Crypto has always been that passenger who insists the road is fine while your teeth are chattering like hyperactive mockingbirds.
But a rough road is not the same thing as a broken carriage.
What I see in this late-year wobble is less a solemn funeral bell and more the ordinary, slightly theatrical housekeeping of a high-beta asset class. After a strong run, excess leverage must be evicted, froth must be skimmed, and the bravest narratives must be tested in the cold light of real positioning. This is the season of the market where confidence is forced to show its receipts.
Now, will 2026 be smooth? We should be careful with that word. Crypto is not a calm lake; it’s a river that churns and forks. Yet I do think it may become more mature in its turbulence. Not tame, just more intelligible. That could mean fewer “the system is ending” headlines and more recognizable risk-asset rhythms.
There’s also a practical reason to keep a hopeful eye on the horizon. If macro conditions allow a more supportive policy stance, and if inflation behaves well enough to avoid a new policy tantrum, risk appetite has a habit of returning. When it does, crypto rarely tiptoes back into the room; it bursts in like a band that was told to play one more song.
So yes, we believe you can expect drama, nerves, and for the market to make cowards of the over-levered and philosophers of the patient. But we believe you shouldn’t confuse a bumpy December with a doomed decade. Sometimes the pothole is simply the price of getting back to a better road.
– Paul Pincente, VP, Digital Assets
Tech valuations have been as sparkly as a department-store window display. Are they built to last, or could a cold gust of reality frost over the sector?
Tech has spent 2025 in full holiday-window mode, but underneath the twinkle, we believe there’s more substance than the pessimists admit.
Earnings revisions in key AI beneficiaries have generally trended higher, margins have improved as cloud and software scale, and many balance sheets remain net cash or lightly levered. I believe we’re witnessing the largest CapEx cycle in tech history, with hyperscalers guiding to tens of billions in annual AI spending. Yet they’re starting from dominant market positions and robust cash-flow engines, which could provide a larger cushion than in past cycles.
The critical distinction for 2026 is between sparkle that’s backed by fundamentals and glamour that relies on hope. I believe some software and smaller AI plays clearly screen as expensive relative to current earnings. However, in core infrastructure, cloud, and select platform companies, valuations look to me more like “high but earned” than outright speculative.
Rather than framing this as a binary bubble or no-bubble debate, we believe investors can treat 2026 as a sorting mechanism. Companies that show clear operating leverage on AI investments and rising returns on incremental capital can hold or even expand their premium. Those who talk in gigawatts and GPUs without a roadmap to unit economics may be most exposed to a cold snap. We believe the sparkle can last, provided there are earnings underneath the lights.
– Nick Mersch, Portfolio Manager
With ETFs, regulation, and institutional flows finally playing nice, is crypto ready to join the adults’ table this holiday season?
There’s a funny thing about markets: they often grow up in the least glamorous ways. Not by fireworks, but by plumbing. Not by poetry, but by policies, filings, and the slow taming of institutional nerves.
So when someone asks if crypto is ready to join the adults’ table, I hear a question in formal dress, with practical shoes underneath.
The adult table is not reserved for the loudest believer. It’s reserved for the asset that can be owned without inventing new rules on the fly. Investors want to know what the rules are, who enforces them, and how the exit doors work when the room gets crowded. That last point matters most. Liquidity is easy to love on sunny days. The grown-up test begins when the weather turns.
ETFs have helped, not because they magically sanctify an asset, but because they translate it into a language institutions already speak. Regulation, even when it arrives late, can mitigate the famous excuse of, “We’re waiting for clarity.” Custody and operational standards, dull as they are, have become the difference between curiosity and allocation.
The story goes beyond Bitcoin. Stablecoins are quietly proving they can be more than a crypto convenience. They’re becoming the practical rails for real payments in real places. Tokenization is inching from pilot projects toward a future that looks less like marketing theatre and more like infrastructure.
Will 2026 be polite? No. Crypto still loves a grand entrance. It may arrive at the adult table in sequins. But the seating plan has changed. The guest list now includes more rule followers, more long-term allocators, and more capital that does not panic at the first cough of volatility.
That’s how a market becomes harder to break. Not by becoming boring, but by becoming dependable enough to survive its own excitement.
– Paul Pincente, VP, Digital Assets
Are AI Models the Star on the Tree or Just Tinsel?
If the last three years were about model breakthroughs, 2026 may shape up to be about what those models actually do in the real world. Tech companies are moving from a race to build the biggest systems to a race to embed them deeply into workflows. That could mean agentic AI that can handle multi-step tasks; multimodal systems that blend text, images, audio, and video; and vertically tuned products that speak the language of specific industries. The opportunity is not just clever demos, but durable productivity gains across white-collar work.
As we argued in July, the message for both companies and investors is simple: adapt now or risk being left behind. We believe the organizations that win will not be those with the flashiest model announcement, but those that quietly replace manual processes with AI-first workflows, redesign products around intelligent assistants, and build the plumbing for governance, security, and data quality. That’s where stickier revenue and higher switching costs emerge.
For investors, we believe this shifts the focus up the stack. Model providers remain important, but value could increasingly accrue in three zones:
- Platforms that orchestrate models and agents
- Application vendors that deliver specific business outcomes, such as higher sales productivity or lower support costs
- Infrastructure and tooling that make deployment safe, observable, and compliant.
In that world, the star on the tree is not model size; it’s customer impact. If a company can show faster cycle times, fewer tickets, better conversion, or lower unit costs thanks to AI, we believe the market may reward it. If not, even the most dazzling tinsel could eventually lose its shine.
– Nick Mersch, Portfolio Manager
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