Investor Jeremy Grantham warned that the artificial intelligence trade has become the largest investment bubble in U.S. history and said a drop of as much as 70% in leading AI stocks “would not be unexpected.” The GMO co-founder also argued that SpaceX’s lofty private valuation reflects late-stage euphoria and dismissed bitcoin as unnecessary.
Grantham Sees Historic AI Bubble Risk
Grantham, who anticipated both the dot-com bust and the 2007–2008 housing collapse, said the market’s AI leaders exhibit classic bubble characteristics, including extreme valuations and speculative momentum. He cautioned that such conditions often resolve with deep drawdowns, adding that a severe reversal in high-flying AI names is plausible.
SpaceX Cited as Peak-Euphoria Signal
Pointing to SpaceX’s valuation in private markets, Grantham described it as emblematic of late-cycle exuberance surrounding transformative technologies. He suggested the company’s pricing serves as a visible marker of the current boom’s intensity, comparing it to past periods when flagship assets became symbols of broader speculative excess.
Bitcoin Dismissed as Unnecessary
Turning to digital assets, Grantham criticized bitcoin, characterizing it as unnecessary and “nonsense.” He has previously argued that assets without cash flows or productive utility are vulnerable during risk-off shifts. His comments arrive as crypto markets contend with tighter financial conditions and heightened volatility across risk assets.
Broader Market Implications
Grantham’s remarks highlight rising concerns that a crowded AI trade could amplify equity-market downside if sentiment reverses. Historically, sharp de-risking has pressured speculative corners of the market, including cryptocurrencies, though bitcoin’s performance can also diverge based on sector-specific factors such as regulatory developments and institutional adoption.