Jeremy Grantham, co-founder of GMO known for calling out previous market bubbles, warned that the AI bubble has pushed US stocks to their highest levels in American history and could lead to a decline of up to 70%.
The veteran strategist made the comments on CNBC, and his basic advice was straightforward. He urged investors to turn away from US stocks and look abroad.
The AI bubble in standard assessments
Grantham He said The market’s price-to-earnings ratio has averaged more than 60% since 2010 compared to the previous century. This premium is tied to years of cheap money. He does not dispute that AI is transformative. Instead, he says, the near-universal faith in technology has led to a dangerous surge in investment, echoing that Growing fears of an artificial intelligence bubble Via Wall Street.
His bubble model sees every previous extreme speculation eventually revert to the trend. He says that falling back on those criteria suggests a decline closer to 70% than 50% in the biggest winners. He acknowledged that the timing could range from two weeks to two years.
Grantham described the dot-com heyday in 2000 and warned of a US housing bubble in 2007. That record carries weight, though his warning of an epic 2021 bubble proved vindicated early on with stocks rising before faltering in 2022. And he’s not alone now, said investor Ray Dalio. He cited similar liquidity risks.
Why Cryptocurrency Investors Are Watching
A 70% reduction will not remain in the stock market. Bitcoin (BTC) is now trading Like technology stocksSo the deep move of risk off tends to hit cryptocurrencies first and hard.
The strain is already showing. Bitcoin ETFs in the US hit a record high 30-day outflow record worth $6.35 billion as of mid-June, according to Galaxy Research.
It was Bitcoin Trading near $59,663 During withdrawal. Meanwhile, Grantham rejects cryptocurrencies, reiterating his view that the token is worthless and heading towards zero.
His recipe favors non-US stocks, bonds and precious metals over expensive US names. Not everyone participates in the alert.
Bulls point out that today’s AI leaders are making real profits, unlike many companies of the dot-com era. Federal Reserve Chairman Jerome Powell described spending on artificial intelligence as real economic activity, not just speculation.
“I’m not going to get into specific names, but they actually have profits… These companies actually have business models and profits and that kind of thing. So it’s really different (from the dot-com era).” He said.
Whether Grantham proves this early or true, his record means that few people will dismiss this warning out of hand.
For cryptocurrency holders, the upshot is that Bitcoin’s fate now depends largely on how long AI trading lasts. The next round of AI earnings will test how justified this optimism is.
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