Veteran Investor Jeremy Grantham Warns of Historic Market Decline Amid AI-Driven Boom

Jeremy Grantham, a seasoned investor and co-founder of GMO, believes the current US stock market is the most expensive in American history, fueled by the artificial intelligence boom. In a recent interview with CNBC's 'Squawk Box,' Grantham noted that the market's value compared to GDP, with modifications, surpasses any previous level. He draws parallels with the tech bubble of 2000, highlighting the Buffet indicator, which shows the total value of the US stock market valuation exceeding twice the size of the economy. This market capitalization to GDP ratio, currently estimated at 235%, has historically signaled caution.

Grantham's warnings are not new, having predicted bear markets in the past, including in March 2024. He cautioned that while timing is uncertain, markets could potentially peak, citing the example of Amazon, whose shares fell 92% after the dot-com bubble before the company's eventual success. Grantham also commented on SpaceX's recent IPO, valuing the company at roughly $2 trillion, as a sign of extreme market enthusiasm, potentially marking one of the defining peaks of all time. His long-term outlook for US stocks remains grim, advising investors to exercise caution amidst the AI-driven boom.

Source: CNBC