veteran Investor jeremy Grantham Warns of AI Bubble
Jeremy Grantham, the co-founder of asset manager GMO, believes the current enthusiasm surrounding artificial intelligence resembles a market bubble. Grantham has a decades-long track record of correctly identifying and warning about impending market crashes, including those involving Japanese equities in the late 1980s, U.S. tech stocks in 2000, and the housing market before the 2008 financial crisis.
He recently discussed his concerns in an interview on the Merryn Talks Money podcast with host Merryn somerset Webb. Grantham argues that the rapid rise in AI-related stock valuations isn’t supported by underlying fundamentals.
Throughout his career, Grantham has consistently taken a contrarian approach to investing. He founded GMO in 1977, and the firm manages billions in assets. His warnings often precede meaningful market corrections, earning him a reputation as a keen observer of market excesses.
Past Predictions:
- Late 1980s: Correctly predicted the decline of Japanese equities.
- 2000: Warned of the bursting of the dot-com bubble in U.S. tech stocks.
- Pre-2008: Foresaw the collapse of the housing market and subsequent financial crisis.
Sources say Grantham’s analysis focuses on price-to-earnings ratios and other valuation metrics, which he believes are currently stretched to unsustainable levels in the AI sector. A number of analysts are now beginning to echo his concerns,though the overall market remains optimistic about AI’s potential.
Major investment firms are pouring capital into AI-related companies, driving up valuations.However, Grantham cautions that these investments may not yield the returns investors are expecting.
